The Last Time Taiwan Semiconductor Did This, the Stock Doubed in a Year

Core Viewpoint - Taiwan Semiconductor Manufacturing Company (TSMC) is experiencing a significant revenue growth driven by the demand for AI chips, with projections indicating that AI revenue will triple in 2024, contributing to a mid-teens percentage of total revenue [3][8]. Group 1: Revenue Growth and Projections - TSMC's AI chip sales are expected to grow at a compound annual rate of 50% over the next five years, with AI chips projected to account for a low teens percentage of revenue by the end of that period [8]. - The company's operating revenue has shown impressive growth, with a quarterly year-over-year growth rate of 36.40% [5]. - Management has indicated that there are no signs of growth slowing down as TSMC heads into 2025, suggesting that the favorable trends observed in 2020 are likely to continue [3][11]. Group 2: Market Position and Valuation - TSMC is the world's largest third-party chip manufacturer, supplying chips to major clients like Nvidia and Apple, which positions the company favorably in the semiconductor industry [13]. - The current valuation of TSMC is slightly above where it was at the beginning of 2020, but it remains in a range that suggests potential for significant growth, similar to the conditions that led to a doubling of the stock in the past [4][10][15]. - The stock was trading at around 19 times earnings at the start of 2024, indicating that it was undervalued compared to other businesses, which may have contributed to its price increase [9]. Group 3: Technological Advancements - TSMC is advancing its technology with the rollout of 2nm chips expected later in 2025, following the successful implementation of the 3nm process node, which enhances chip density and processing power [2][7]. - The company has a history of launching advanced chips, having previously introduced its 5nm chips during a period of significant demand, which parallels the current market conditions [14].