TSMC(US:TSM) The Motley Fool·2025-12-27 08:23Core Insights - Taiwan Semiconductor Manufacturing Co. (TSMC) is experiencing unprecedented demand driven by artificial intelligence (AI) applications, with shares nearly tripling in value over the past five years, turning a $1,000 investment into $2,800 [1] - Despite the strong stock performance, TSMC's valuation still presents significant upside potential over the next five years [2] Financial Performance - TSMC's earnings per share (EPS) surged by 39% year over year in the third quarter, showcasing its competitive advantage in producing high-performance chips [5] - Analysts project TSMC's EPS to grow at an annualized rate of 22% in the coming years, with a current price-to-earnings (P/E) ratio of 30, which is expected to decrease to 23 based on 2026 earnings estimates [4] Market Position and Growth Potential - The company has a market capitalization of $1.6 trillion and a gross margin of 57.75%, indicating strong profitability [6][7] - TSMC's management anticipates revenue from AI chips to grow at a compound annual growth rate (CAGR) exceeding 40% through 2029, highlighting a significant growth opportunity [5][7] - The CEO described the demand for AI chips as "insane," suggesting that investors may still be underestimating the future growth potential [7] Investment Outlook - With robust earnings growth and ongoing investments in expanding manufacturing capacity, TSMC is positioned as an attractive investment for those looking to outperform the market [8]