Prediction: $1,000 Invested in Taiwan Semiconductor Today Will Be Worth This Much by 2030

When we think of the artificial intelligence (AI) boom, we might first think of the chip players making the headlines, from Nvidia to Advanced Micro Devices. We know them for the high-powered graphics processing units (GPUs) that fuel critical AI tasks such as the training and inference of models.

But those chips can't make it to commercialization without another company, and that's Taiwan Semiconductor Manufacturing (NYSE: TSM). TSMC is the manufacturer that makes most of today's leading chips, as it holds more than 70% of the global chip foundry market. So while Nvidia, AMD, and others design the chips, TSMC actually brings them from the drawing board to reality.

All of this has created tremendous growth for TSMC, and the latest earnings report illustrates this. Last week, the company reported record profit for the sixth straight quarter. How does this translate into stock performance? My prediction is that $1,000 invested in TSMC today will be worth this much by 2030...

Image source: Getty Images.

TSMC's market leadership

Before we dive into those numbers, though, let's take a deeper look at TSMC. As mentioned, the company is the global leader in the foundry market, so it produces most of the chips in high demand today. This means that TSMC may benefit from the successes of all of the leading chip players -- not just one or two. And this positions the company very well for significant growth as the AI boom continues.

A look at the recent quarter illustrates the picture. In the third quarter, TSMC reported profit and revenue that surpassed analysts' estimates and forecast fourth-quarter revenue in the range of $52.3 billion and $54.3 billion. At the midpoint, that represents a 58% year-over-year increase.

TSMC's gross margin has declined slightly, and the company forecasts a decrease of 40 basis points to 66% at the midpoint for the fourth quarter. But it's important to keep in mind the reason behind that, and it's linked to growth. TSMC's ramp-up of its 2 nm technology, or next-generation manufacturing process, initially weighs on margins, and the company is also seeing pressure from the costs of its U.S. fabs. But productivity gains should offset this to a certain degree over time.

Importantly, TSMC chief C.C. Wei emphasized the ongoing strength of the AI market. "Recent developments are very positive to AI's long-term demand outlook," he said, noting the increasing adoption of agentic AI and the greater use of open-source AI models.

Estimates call for a 30% increase in EPS

Now, let's consider how that may translate into stock performance. TSMC has climbed more than 300% over the past three years and today trades at about $422, or 27x trailing 12-month earnings. A look at earnings per share estimates for TSMC over the coming few years shows a 30% increase from year to year.

TSM EPS Estimates for Current Fiscal Year data by YCharts

If the 30% growth trend continues, the company's earnings per share may total more than $38 in 2030.

That leaves room for the stock price to climb more than 135% to $1,000, as at that level, the stock would trade at a price-to-earnings ratio of 26. And market capitalization would reach $5 trillion. This is about the size of Nvidia right now, which is the biggest company by market value. In such a scenario, we could imagine other technology giants also increasing in market value.

Considering all of this, my prediction is that $1,000 invested in TSMC today could be worth $2,350 by 2030. Of course, this is built on the assumption that earnings growth continues at a particular pace. In the quarters to come, we could see certain variations of this scenario, from a lower-margin situation due to foundry expansion to higher demand that may drive greater revenue.

But given TSMC's leadership in the manufacturing space and the long-term AI growth picture, there's reason to be optimistic about the growth of a $1,000 investment in this chip giant.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.