There Are 10 Trillion-Dollar Stocks On the Market. This Is the Only One That's Up This Year
Key Points
The AI trade is starting to show some fatigue.
Stocks have tumbled since the war in Iran broke out.
Taiwan Semiconductor's competitive advantages only seem to be getting stronger.
- 10 stocks we like better than Taiwan Semiconductor Manufacturing ›
A decade ago there were no trillion-dollar stocks. Today, even after a slump in tech stocks, there are ten companies that are currently above that threshold, a testament to the strength of the stock market in recent years.
The following are the ten stocks shown along with their market caps:
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- Nvidia ($4.07 trillion)
- Apple ($3.65 trillion)
- Alphabet ($3.32 trillion)
- Microsoft ($2.65 trillion)
- Amazon ($2.14 trillion)
- Taiwan Semiconductor ($1.7 trillion)
- Broadcom ($1.42 trillion)
- Tesla ($1.36 trillion)
- Meta Platforms ($1.3 trillion)
- Berkshire Hathaway ($1.01 trillion)
As you can see, the tech sector now dominates the top echelon of the stock market as all of those stocks can claim to be tech stocks with the exception of Berkshire Hathaway. Nearly all of them have been heavily investing in AI and have benefited from the AI boom as well.
However, a basket of these tech stocks would be down 12% this year through March 27, underperforming all three major indexes. That shows not only that tech stocks have fallen sharply this year, but also how the "Magnificent Seven" have been hit hard on fears of both AI disrupting the software sector and the big hyperscalers overspending on capital expenditures, much of it to serve as AI infrastructure.
However, one tech giant has bucked the trend in among the trillion-dollar set. That's Taiwan Semiconductor Manufacturing Corporation, or TSMC.
Image source: Getty Images.
Why Taiwan Semi is still winning
Year-to-date, TSMC is up 7.5% through March 27. That's not a huge gain, but in a market where the S&P 500 is down 7%, that means TSMC has outperformed more than 70% of the broad-market index.
AI stocks are withering, but Taiwan Semi has resisted the downward trend. It has exposure to artificial intelligence as the top fabless chip companies like Nvidia, AMD, and Broadcom, and 55% of its revenue came from high-performance computing, which is for AI, in the fourth quarter.
That revenue is theoretically at risk if demand for AI chips crashes and the bubble bursts, but with the big hyperscalers planning to spend around $700 billion in capital expenditures this year and Nvidia saying it will earn $1 trillion in revenue over the next two years, any pullback among TSMC's top customers isn't going to happen anytime soon.
Additionally, TSMC's economic moat is arguably wider than any of the other companies on the list above. The manufacturer produces more than half of the contract semiconductors in the world and roughly 90% of the advanced third-party chips.
TSMC's expertise and network of more than 15 fabs, which each cost tens of billions of dollars to build, means that its leadership in semiconductor production won't be easily undone, and rivals like Intel and Samsung have fallen further behind in recent years.
Is TSMC a buy?
Taiwan Semi continues to deliver strong growth on the top and bottom lines with revenue up 26% to $33.7 billion, and an operating margin of 54%, showing how strong its competitive advantage is.
Even as the stock has continued to gain this year, it still trades at a reasonable price-to-earnings ratio of 31.5. Historically, TSMC has traded at a discount because it's based in Taiwan, and investors believe there's a risk of China invading the territory.
Like other tech stocks, TSMC has pulled back since the Iran war broke out, down 13%, showing it does have macroeconomic exposure, but it delivered strong gains in the first two months of the year.
Overall, Taiwan Semi has been one of the most reliable stocks in the tech sector, and it looks poised to keep delivering strong growth at a reasonable valuation. The stock remains a buy.
Should you buy stock in Taiwan Semiconductor Manufacturing right now?
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Jeremy Bowman has positions in Advanced Micro Devices, Amazon, Broadcom, Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Berkshire Hathaway, Intel, Meta Platforms, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, and Tesla and is short shares of Apple. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
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