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🇹🇼 Taiwan /Economy & Trade

TSMC Stands Firm Amid AI Stock Sell-off, Foreign Media Reveals Reasons

From Liberty Times · () Chinese

Translated from Chinese, summarized and contextualized by DistantNews.

At a glance

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  • Taiwan Semiconductor Manufacturing Company (TSMC) has shown strong resilience with its stock price rising nearly 50% this year, bucking the trend for many AI stocks.
  • TSMC's dominant 72% global market share in chip manufacturing and anticipated industry-wide capital expenditure increases solidify its crucial role in the AI supply chain.
  • Despite a higher valuation, analysts consider TSMC a stable long-term investment for participating in the AI industry's growth, as most high-end chips will likely be produced by the company regardless of market dominance shifts.

While many AI stocks have struggled this year, Taiwan Semiconductor Manufacturing Company (TSMC) has emerged as a significant winner, with its stock price climbing nearly 50% year-to-date. This resilience sets it apart in a challenging market for AI-related equities.

If there were no TSMC, the development of the global artificial intelligence industry would be completely different.

— The Motley FoolHighlighting TSMC's foundational role in the AI industry.

The global artificial intelligence industry's development hinges on TSMC, which commands an estimated 72% of the worldwide foundry market share. This dominance underscores its indispensable position in the AI ecosystem. Future growth is further bolstered by anticipated increases in industry capital expenditure. For instance, NVIDIA has projected that AI hyperscale data center operators will spend $1 trillion on data centers by 2027, with global annual data center capital expenditure potentially reaching $3 trillion to $4 trillion by 2030.

This projected spending ensures TSMC's continued relevance, irrespective of which chip companies ultimately lead the market. Regardless of the competitive landscape, high-end chips will likely require TSMC's manufacturing capabilities. This strategic placement within the AI supply chain explains its stock's stability compared to other AI firms.

TSMC accounts for about 72% of global foundry revenue.

— The Motley FoolQuantifying TSMC's dominant market share.

However, investing in TSMC comes at a premium. The market recognizes its importance, leading to a higher valuation with a current price-to-earnings ratio of approximately 28. While not inexpensive, this valuation is considered reasonable given the company's historical performance and the future growth potential driven by the AI sector.

AI hyperscale data center operators' data center capital expenditure will reach $1 trillion in 2027.

— NVIDIAIndicating massive future investment in AI infrastructure.

Analyst Keithen Drury identifies TSMC as one of the most compelling long-term investment opportunities within the AI growth cycle. With substantial room for expansion in the AI industry, TSMC is positioned at the core of this technological transformation, offering a relatively secure avenue for investors to engage with the long-term growth trend.

TSMC is one of the stocks most worth buying and holding for the long term in the AI development cycle.

— Keithen DruryAnalyst's recommendation on TSMC's investment potential.
DistantNews Editorial

Originally published by Liberty Times in Chinese. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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