Prediction: Taiwan Semiconductor's Market Value Passes $3 Trillion Before 2029

Taiwan Semiconductor Manufacturing (NYSE:TSM) is already worth about $2.2 trillion, with shares of the chip foundry trading at about $427 as of this writing.

My prediction: The company's market value passes the $3 trillion mark before 2029. To be specific, that means sometime before the end of 2028, about two years and four months away.

That may sound like a bold call. The stock would need to reach about $580 per share, about 21% above its 52-week high of $479.

But the yearly return the milestone requires is more ordinary than it sounds. And it's a fraction of the pace TSMC's business is growing at today.

Image source: TSMC.

TSMC needs about 14% a year to get there

Going from about $2.2 trillion to $3 trillion is a gain of about 35%. Spread over that stretch, it works out to about 14% compounded annually.

For a business growing the way TSMC is right now, that isn't a high bar.

I'm not assuming investors pay more for each dollar of TSMC's earnings than they do today, either. If the stock's price-to-earnings multiple simply holds steady, the share price should track earnings growth over time. In other words, earnings compounding at about 14% a year through 2028 could arguably get the company there on its own.

A 40% year

Highlighting how far ahead of that bar the business is running, TSMC's second-quarter revenue rose 36% year over year to NT$1.27 trillion ($40.2 billion in U.S. dollars), while net income surged 77%. Gross margin was 67.7%, a big step up from 58.6% a year before. And the momentum has carried into the second half of the year. July revenue rose about 45% year over year, putting revenue through the first seven months of 2026 up 37%.

Management expects more of the same. Guidance calls for third-quarter revenue of $44.6 billion to $45.8 billion. Against the year-ago quarter's $33.1 billion, the midpoint represents about 37% growth -- an acceleration from the second quarter's pace in dollar terms.

In July, management also raised its full-year outlook to revenue growth slightly above 40% in U.S. dollar terms.

"Moving into third quarter 2026, we expect our business to be supported by continued strong demand for our leading-edge process technologies, including the steep ramp-up of our 2-nanometer technology," said Wendell Huang, TSMC's chief financial officer, in the company's second-quarter earnings release.

The company is spending like it expects the demand to last, too. Management now plans $60 billion to $64 billion of capital spending in 2026, up from its earlier budget, and it announced an additional $100 billion investment in Arizona to build several more leading-edge chip fabs and advanced packaging plants.

What could go wrong?

The main risk is concentration.

High-performance computing accounted for 66% of TSMC's revenue in the second quarter, tying the company's growth closely to the artificial intelligence (AI) build-out. If the biggest spenders on AI infrastructure pull back, growth could slow quickly.

Of course, margins could give back some ground, too. Gross margin guidance of 65% to 67% for the third quarter sits below the 67.7% the company just posted. If profitability drifts lower from here, earnings could grow more slowly than revenue does -- and it's earnings growth, not revenue growth, that has to average about 14%.

But the prediction can absorb a lot of deceleration. Say revenue growth halves to 20% in 2027, then halves again to 10% in 2028.

Even that path compounds at about 15% a year over those two years, still above the requirement, assuming profit margins hold near current guidance and the price-to-earnings multiple stays put. And it leaves out the rest of 2026, when growth is running at about three times that pace.

The scenario I take more seriously, however, is a market that changes its mind. If investors sour on AI infrastructure spending, they could pay less for each dollar of TSMC's earnings even while those earnings keep growing. A compressing price-to-earnings multiple would likely raise the bar on the business -- possibly well past 14% a year.

Ultimately, though, a business guiding for revenue growth slightly above 40% this year clears a 14% hurdle with plenty of room to spare, even if growth fades hard through 2027 and 2028. I expect Taiwan Semiconductor's market value to top $3 trillion before the end of 2028.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.