TSMC: Why This Semiconductor Giant Looks Like a Massive Bargain Right Now

Taiwan Semiconductor Manufacturing (NYSE: TSM), popularly known as TSMC, is the world's largest semiconductor foundry, which fabricates chips for the top consumer electronics companies and chip designers across the globe. That explains why it has been growing at an impressive pace over the past couple of years.

The world's leading companies, such as Nvidia, AMD, Broadcom, Sony, and Apple, tap TSMC's plants for manufacturing chips that power personal computers (PCs), smartphones, data centers, and gaming consoles, among others. As a result, TSMC is in a solid position to benefit from the secular growth of the global semiconductor market, which is expected to hit $2 trillion in annual revenue in 2032.

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That would be more than triple the $656 billion in revenue that the semiconductor industry generated last year. However, TSMC stock has been caught in the tariff turmoil of late, which explains why it is down more than 20% in 2025 as of this writing. But this pullback has made TSMC a terrific bargain.

Let's look at the reasons why buying TSMC looks like a no-brainer right now.

TSMC is making the right moves to maintain its dominance

TSMC enjoys a massive lead in the foundry market with an estimated share of 67%, according to Counterpoint Research. That figure has been heading higher in recent quarters. Specifically, TSMC's foundry market share increased by six percentage points in 2024. Meanwhile, second-placed Samsung lost ground in this market as its share shrank by three points to 11%.

A key reason why TSMC has been able to open such a huge gap over rivals in the foundry market is because of its technological advantage. TSMC's advanced process nodes allow its customers to manufacture powerful and power-efficient chips. For example, TSMC's 3-nanometer (nm) node is considered to be the most advanced chip manufacturing technology.

This process node is being used to manufacture smartphone chips and PC processors by the likes of AMD, MediaTek, Apple, and Qualcomm. Now, it looks like Nvidia will tap TSMC's 3nm process node to manufacture its next-generation Rubin graphics processing units (GPUs). Looking ahead, TSMC is looking to push the envelope further in chip manufacturing technology with the 2-nanometer process.

The company is expected to start mass-producing its 2nm processors in the second half of this year, which could put it ahead of rivals Samsung and Intel. Meanwhile, TSMC is also looking to diversify its global presence. The company has pledged an investment of $165 billion in the U.S. to build advanced chip manufacturing facilities that will power artificial intelligence (AI) applications.

It is worth noting that TSMC already fabricates chips for the leading AI semiconductor companies such as Nvidia, Broadcom, and Marvell, and its focus on boosting investments in advanced technologies should allow it to maintain its dominant position in the global foundry market. Additionally, TSMC's strategy of diversifying its global manufacturing footprint in countries such as Japan, the U.S., and Europe could turn out to be a smart move in the long run as it could help it mitigate the challenges arising out of potential trade-related conflicts, such as the one we are witnessing right now.

So, it won't be surprising to see TSMC remaining the top semiconductor foundry for a long time to come, and that's expected to translate into robust financial growth for the company.

A huge addressable market suggests TSMC is built for healthy growth

TSMC finished 2024 with $90 billion in revenue, an improvement of 30% from the prior year. The company has got off to a stronger start in 2025, recording a solid 42% jump in revenue in the first three months of the year to $25.6 billion. That's better than what the market was anticipating. Analysts expect TSMC's growth to gain momentum as the year progresses, as evident from the chart below.

TSM Revenue Estimates for Current Fiscal Year data by YCharts

What's more, the chart above also tells us that TSMC is on track to deliver robust growth over the next couple of years as well. Importantly, it won't be surprising to see the company sustaining its solid growth for a much longer period in light of the points discussed in the article. The semiconductor market is set to grow at an impressive pace, and TSMC itself sees a total addressable market worth almost $250 billion in its foundry and packaging services.

That figure could be bigger in the future as the size of the semiconductor market keeps growing. Not surprisingly, TSMC management expects to maintain an annual revenue growth rate of 20% for the next five years, which should translate into robust bottom-line growth as well. All this makes TSMC a top semiconductor stock to buy right now as it is trading at just 22 times trailing earnings and 17 times forward earnings, which is a nice discount to the tech-laden Nasdaq-100 index's forward earnings multiple of 27 (using the index as a proxy for tech stocks).

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Intel, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Marvell Technology and recommends the following options: short May 2025 $30 calls on Intel. The Motley Fool has a disclosure policy.