Key Points
As companies get larger, it will become more common for them to cross the $1 trillion and $2 trillion thresholds. Still, there are only a handful of companies within striking distance, as only 19 companies worldwide have a market cap of $500 billion or greater.
One of the most promising companies in this group is Taiwan Semiconductor Manufacturing (NYSE: TSM), which has a market cap of $1.2 trillion.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »
I think TSMC is slated to become a $2 trillion company within a few short years, thanks to its position in an important industry. Although it has delivered impressive shareholder returns over the past few years, I think it’s slated for even more as it pursues a $2 trillion valuation.
Image source: Getty Images.
Taiwan Semiconductor’s new technology will keep it at the top
TSMC is a chip fabricator that offers its capabilities to some of the most important tech companies in the world. Companies like Apple (NASDAQ: AAPL) and Nvidia (NASDAQ: NVDA) utilize TSMC’s production capabilities, as they design the chips in-house and then send them to TSMC to be produced.
As companies like Apple and Nvidia push to have more secure supply chains, TSMC’s $165 billion investment in its Arizona production facility makes it an even more attractive partner. Demand for U.S.-produced chips has been overwhelming, and production capacities at the Arizona facility that’s currently operational have reportedly sold out through 2027.
With Intel‘s (NASDAQ: INTC) chip foundry business struggling and TSMC’s booming, it’s clear which company has become the preferred partner for many of the leading tech companies.
Another factor in TSMC’s success is its drive to continuously push the edge of what’s possible. Although Taiwan Semiconductor has the best possible technology in the world with 3 nanometer (nm) chips, it’s pursuing a 2nm chip that is slated for launch later this year. This chip node is seeing massive pre-production demand, as it will consume 25% to 30% less power when configured at the same speed as a 3nm chip.
This is a big deal, as it helps energy-intensive artificial intelligence (AI) workloads become more efficient as TSMC’s 2nm chips roll out. Beyond that, it’s working on the A16 and A14 chips that also improve energy consumption.
TSMC has cemented itself at the center of all cutting-edge technology, which will allow it to succeed as AI demand rises and falls, and a different technology boom takes its place (such as self-driving cars). Despite all of its success and its lucrative market position, Taiwan Semiconductor’s stock doesn’t get a ton of respect.
TSMC doesn’t trade at a massive premium like its peers
TSMC’s revenue grew at a 44% pace in U.S. dollars during Q2. That’s a speed that few companies outside of Nvidia can match, yet TSMC trades at a fairly low price tag.
TSM PE Ratio (Forward) data by YCharts
At 23.9 times forward earnings, Taiwan Semiconductor trades at basically the same price as the broader market, as measured by the S&P 500 (SNPINDEX: ^GSPC). The S&P 500 trades for 23.7 times forward earnings, so despite TSMC’s rapid growth rate, it doesn’t have a premium valuation.
Management is quite bullish on its long-term outlook. For the next five years starting in 2025, it believes its AI-related chip revenue will rise at a 45% compound annual growth rate (CAGR) and overall revenue will increase at nearly 20%. That’s monstrous growth, and shows that 2025 will not be the end of heightened chip demand.
Investors already know that many of the AI hyperscalers are going to be increasing their data center capital expenditures during 2026. These buildouts take several years, so it’s clear that overall demand for AI computing capacity is still increasing. This is a multiyear growth driver for TSMC, and will be one of the primary reasons why the company eventually reaches a $2 trillion market cap.
I think Taiwan Semiconductor is one of the best buys on the market today, and investors should consider scooping up shares before the market decides to give it an even higher premium due to its growth and position in the AI arms race.
Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now?
Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $651,599!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,067,639!*
Now, it’s worth noting Stock Advisor’s total average return is 1,049% — a market-crushing outperformance compared to 185% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.
*Stock Advisor returns as of August 25, 2025
Keithen Drury has positions in Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Apple, Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: short August 2025 $24 calls on Intel. The Motley Fool has a disclosure policy.