Meet the Next Member of the $2 Trillion Club. It's Up 97% in the Past Year, and It Can Still Climb Higher in 2026.

The five existing members of the $2 trillion club are all beneficiaries of the growing demand for artificial intelligence (AI). Alphabet, Microsoft, and Amazon have all seen demand for their cloud computing AI services outstrip their ability to build new data centers and stand up servers. Nvidia is the largest graphics processing unit (GPU) supplier to data centers. And Apple has quietly positioned its iPhone and other devices to capitalize on industry advances in AI.

The next member of the $2 trillion club is an important partner to all five of those companies. The massive spending from the hyperscalers, Nvidia's push to more advanced GPUs and central processing units, and Apple's efforts to prepare its devices for the generative AI era all trickle down to this one company: Taiwan Semiconductor Manufacturing (NYSE: TSM).

The stock briefly touched a $2 trillion market cap in late February, but it's since pulled back to just $1.8 trillion. Still, it's up 97% in the past year, as of this writing. I predict it won't be long before it retakes the $2 trillion level and keeps climbing from there.

Image source: Getty Images.

Powering the most advanced chips

TSMC is the largest contract chip manufacturer in the world, and the gap between it and second place is growing wider. TSMC accounted for almost 70% of all spending by companies such as Nvidia, Apple, and other chip designers in 2025. Second-place Samsung Electronics (OTC: SSNL.F) accounted for just 7% of all spend.

TSMC's market share is poised to keep growing in 2026 and beyond, as it holds a substantial technology lead. Its 2nm process went into mass production at the end of 2025, with all the capacity in its existing facilities supporting the process booked into mid-2027.

To be sure, Samsung is making good progress with its 2nm process, significantly improving the yield of viable chips per silicon wafer. However, yields remain below TSMC's 2nm process. More importantly, Samsung may have some capacity available at its foundries, but it doesn't have the capacity to steal a meaningful workload from TSMC. Furthermore, TSMC's IP library and packaging capabilities are unmatched, creating significant switching costs for anyone considering moving to the smaller competitor.

As a result, TSMC has been able to raise its pricing. It implemented a price hike on its most advanced chipmaking processes at the start of 2026 by 3% to 10%. Reports indicate TSMC plans to raise prices each year through 2029, suggesting very strong pricing power and clear visibility of demand over the next few years.

Indeed, TSMC is investing heavily to meet that demand. Management plans to spend between $52 billion and $56 billion on capital expenditures this year. That's up from $40.9 billion last year. It's spending a significant amount on new facilities in Arizona, which can help mitigate the geopolitical risk of the Taiwan-based company. However, U.S. fabs cost much more to build and operate than Taiwanese fabs, which may be another reason TSMC is planning to raise pricing through 2029 when the last Arizona fab will start volume production.

The path to $2 trillion

With increased spending by Amazon, Microsoft, and Alphabet on data centers and the strong demand for Apple's iPhone seen last quarter, TSMC looks poised for another strong year in 2026. Management guided to 30% full-year revenue growth in U.S. dollar terms, and it expects to see further improvements in gross margin in the first quarter. Through the first two months of the year, revenue is up 30% on an FX-neutral basis, in line with expectations. Note, the U.S. dollar is weaker than it was a year ago.

Management sees those strong results continuing through the end of the decade. It updated its five-year revenue outlook for 2025 through 2029 to a compound annual growth rate of 25% in U.S. dollar terms. A 36% increase in 2025 and expectations for 30% growth in 2026 suggest annualized growth of 20% in 2027 through 2029. It's also worth pointing out that management is historically conservative with its outlooks, which means there could be further upside.

With strong demand for both its 3nm and 2nm processes and planned price hikes, it should be able to achieve high gross margins even as it ramps up its next-generation process. As such, investors can expect earnings growth to outpace its top-line growth.

As such, TSMC shares deserve an earnings multiple well above its current 24 times analysts' expectations. If TSMC can achieve an earnings multiple of 27, its market cap will exceed $2 trillion. Granted, there are geopolitical risks weighing on its valuation. But as TSMC continues to put up solid earnings growth quarter after quarter, even a low earnings multiple will push its value above the $2 trillion threshold.

Adam Levy has positions in Alphabet, Amazon, Apple, Microsoft, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing and is short shares of Apple. The Motley Fool has a disclosure policy.