Taiwan Semiconductor needs four years of 20% growth to accomplish this goal.
The $3 trillion valuation club is a fairly exclusive group to be a part of. Currently, only four companies have ever breached this valuation level: Nvidia (NVDA +2.26%), Apple (AAPL +1.25%), Microsoft (MSFT +0.56%), and Alphabet (GOOG +2.70%) (GOOGL +2.70%). However, I think there could be a few more entrants into this exclusive club over the next few years, with one of them being Taiwan Semiconductor Manufacturing (TSM +1.46%).
Taiwan Semiconductor has a ways to go, as it’s a $1.5 trillion company right now. So, for it to join the club by 2029, the stock would need to double in four years. If it can do that, Taiwan Semiconductor would easily outperform the market, making it a must-buy stock now. I think Taiwan Semiconductor is well positioned to accomplish this goal, and is my favorite way to invest in the artificial intelligence (AI) megatrend.
Image source: Getty Images.
Taiwan Semiconductor is a critical supplier for every AI infrastructure company
Taiwan Semiconductor is the world’s leading contract chip manufacturer and has the most revenue of any chip factory by far. This places Taiwan Semiconductor in a neutral position in the AI race, as it’s the one manufacturing the chips that every company needs. Regardless of whose computing units are being deployed — be it Nvidia, AMD, or Broadcom — they all get their chips from TSMC, making it a critical part of the AI supply chain.
Taiwan Semiconductor doesn’t take this position lightly, and it’s accomplishing several goals to improve the AI situation.
The first item TSMC is tackling is expanding its global footprint. One of the biggest concerns about Taiwan Semiconductor is its location, right off mainland China. Political fears about what China may do can drive stock sentiment, and a takeover would sink TSMC stock. However, this would also tank the rest of the market because every big tech company is dependent on chips from TSMC. To diversify its footprint, TSMC is building several chip fabrication sites around the world, with a $165 billion investment in the U.S. This diversification will help secure TSMC’s global supply chain and ease the fears of a single point of failure.
Taiwan Semiconductor Manufacturing
Today’s Change
(1.46%) $4.23
Current Price
$294.96
Key Data Points
Market Cap
$1530B
Day’s Range
$294.39 – $297.95
52wk Range
$134.25 – $311.37
Volume
136K
Avg Vol
12M
Gross Margin
58.06%
Dividend Yield
0.01%
A second task that TSMC has accomplished is tackling the energy crisis. It’s no secret that AI data centers are energy hogs. Energy capacity could become a huge constraint in the U.S. in the near future, but TSMC’s newest technology partially solves the problem. TSMC has 2nm (nanometer) chips entering volume production this quarter, and their improvements could change how much energy chips consume. Management claims that 2nm chips consume 25% to 30% less power than previous-generation 3nm chips when configured to run at the same speed. A massive energy consumption improvement like that could increase the amount of computing hardware that’s run on a limited energy supply, allowing the AI hyperscalers to achieve their buildout plans. Those 2nm chips aren’t cheap, and this new technology will cost the AI hyperscalers a fair bit of money, but those funds will help fuel Taiwan Semiconductor’s rise to become a $3 trillion company by 2029.
Taiwan Semiconductor’s management team has laid out a path to achieve this goal
At the start of 2025, TSMC’s management team laid out a path to achieve a 20% compound annual growth rate (CAGR) over the next five years. A CAGR isn’t consistent growth, as it measures revenue totals at the beginning and the end of the analysis. However, this year has been an anomaly that not even TSMC saw coming, so this projection may need to be altered to adjust for the growth that occurred this year. Still, I think growing at a 20% rate over the next few years is achievable due to the massive demand for AI chips.
Should TSMC increase its revenue at a 20% rate over the next four years, that would be enough to double its revenue. As long as TSMC maintains its margins and share count, that would result in the stock doubling if the business and stock stay correlated. I think the 20% growth rate is achievable due to massive AI data center buildouts, and makes TSMC a must-own stock due to its ability to crush the market.
Keithen Drury has positions in Alphabet, Broadcom, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
