Prediction: This Will Be Taiwan Semiconductor's Stock Price at the End of 2027

Few stocks are in a better position to benefit from the artificial intelligence (AI) build-out than Taiwan Semiconductor Manufacturing (NYSE: TSM). The company is the leading manufacturer of logic chips, which are the primary factors that differentiate one company's computing products from another. TSMC has leading technology and production facilities, and its services are used by practically every leading big tech firm.

That also gives TSMC a great pulse on the industry, and what it informs investors of can probably be taken at face value. But where will that send the stock price? Let's find out.

Image source: Taiwan Semiconductor Manufacturing Company.

AI demand is far from over

As more and more AI data centers are built out, the question of when this will slow down continues to rise. However, I think we're a long way off from that.

One of TSMC's major clients, Broadcom, was talking about 2029 demand in a recent conference call, and with several projections pointing to the data center build-out lasting through 2030, it's a long way from being complete.

TSMC itself noted that demand through 2029 to 2030 already looks "very strong." However, during its conference call, CEO C.C. Wei noted that there is a new kind of industry being born, and that could affect chip demand for the foreseeable future. That bodes well for TSMC investors, as this demand wave may last for decades. Why? Because AI isn't the only thing that uses chips.

Wei pointed to robotics and self-driving vehicles as major chip users, and as AI progresses, these technologies may become within reach and require a vast number of chips. That would shift the demand from one industry to another, but TSMC would once again be the primary chip provider.

An investment in TSMC is a bet that we'll need more advanced chips in greater quantities in the future, which seems like a pretty high-probability bet. As a result, I think it's safe to say that TSMC is in a great spot to thrive. Furthermore, it announced an additional $100 billion to be invested in its Arizona production facilities. If TSMC thought that demand would drop in the near future, it wouldn't be making those investments.

Clearly, TSMC will be safe over the next few years, which I think makes today's valuation trends applicable for 2027, and that will lead to a rising stock price.

TSMC's stock is a smart buy now

Currently, TSMC trades for about 31 times earnings.

TSM PE Ratio data by YCharts.

I think that's a fair price to pay considering the company's importance in the industry and its leadership position. For 2027, Wall Street analysts expect earnings per share of $21.86 at the midpoint. Analysts have underestimated the strength of companies involved in AI all along the build-out, so I think that projection is more of a floor than a midpoint, but it bakes in a bit of conservatism into the estimate.

Should TSMC achieve $21.86 and trade for 31 times earnings at the end of next year, that would price the stock at $678 per share. Right now, TSMC's stock trades for about $435 per share. That's an upside of more than 55%, and anytime you can find a stock that has a reasonable chance of rising more than 50% in a year and a half, it should make the stock an automatic buy.

Taiwan Semiconductor Manufacturing is an obvious beneficiary of the AI build-out, which is expected to last for several more years; the stock is a rare case of a low-risk, high-reward investment.

Keithen Drury has positions in Broadcom and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Broadcom and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.