This Artificial Intelligence (AI) Stock Just Hit a 52-Week High -- and It's Still Undervalued

Core Viewpoint - Taiwan Semiconductor Manufacturing Company (TSMC) is identified as a leading investment opportunity in the AI sector, particularly due to its role as a critical supplier for AI companies and its potential for growth despite recent stock price increases [1][2]. Group 1: Company Overview - TSMC is the world's leading contract chip manufacturer, dominating the chip fabrication space and showing signs of strengthening market position [2]. - The company serves as a foundry for fabless chip companies such as Nvidia, AMD, and Apple, providing significant exposure to the growing AI market [3]. Group 2: Growth Potential - TSMC is expected to experience substantial growth, with management predicting AI-related revenue to grow at a 45% compound annual growth rate (CAGR) over the next five years, while overall revenue is projected to increase at a 20% CAGR [5]. - The stock has risen 220% since the beginning of the AI arms race in 2023, yet it is still considered undervalued compared to its growth prospects [5][10]. Group 3: Valuation Insights - TSMC's stock trades at approximately 24.7 times forward earnings, slightly above the S&P 500's 23.7 times, indicating a potential undervaluation given TSMC's faster growth rate [7]. - Despite leading in revenue growth, TSMC's valuation lags behind some of its tech peers, suggesting that its market multiple could expand in the coming years [10]. Group 4: Strategic Initiatives - Management is actively working to diversify TSMC's manufacturing footprint, with plans to invest $165 billion to enhance U.S. production capacity, which will help secure supply chains and mitigate tariff impacts [4].