Taiwan Semiconductor Manufacturing (TSM): Still Trading at an Attractive Valuation Despite Strong Growth
Taiwan Semiconductor Manufacturing (TSM) is a powerhouse in the semiconductor space, and its stock is up an impressive 91% over the last year. This company plays a crucial role in high-performance computing, manufacturing chips for industry giants like Nvidia, and it’s seeing strong demand, especially from AI applications. TSM’s revenue grew 36% year-over-year in Q3 2024, and earnings jumped 54%, driven by the robust demand for AI-related chips.
What’s particularly impressive is that TSMC is positioning itself to continue benefiting from this growth. Management reported that the revenue contribution from AI server chips is on track to triple this year, signaling how strong the AI-related demand has been. In addition, the company is increasing its capital expenditures to over $30 billion for the year to invest in future growth, signaling its commitment to meeting this rising demand.
With 62% of the global foundry market in Q2 2024 and plans to ramp up its production capabilities in the years ahead, TSMC is poised to maintain its market dominance. Analysts expect the company to deliver strong earnings growth of 31% annually, making its stock still a solid buy despite its recent surge. TSMC is currently trading at a forward price-to-earnings ratio of 27 for 2024 estimates and 21.5 for 2025, which still represents an attractive valuation for such a key player in the semiconductor and AI space.
For investors looking for exposure to a company that is not only riding the AI wave but is also crucial to the global semiconductor supply chain, Taiwan Semiconductor Manufacturing remains a top pick.
