Last summer, I directed investors to TSMC stock, calling the company the unsung hero of the AI industry.
“If TSMC stock were appropriately priced, it’d be a trillion-dollar company — joining the ranks of Microsoft, Apple, Nvidia, Google, Amazon, and Meta,” I wrote.
Well, after a 25% rally over the past six months and a 9% surge to start the year, we’re on track to see that happen.
TSMC — or Taiwan Semiconductor (NYSE: TSM), officially — dropped a bombshell earnings report last week.
The company’s fourth-quarter profit jumped 57% to a record-high $11.4 billion, while revenue increased 39%.
Better still, TSMC expects its revenue will grow 37% in the current quarter and 20%–30% for the full year.
This tracks for the world’s largest contract chipmaker, a vital partner to heavyweights enterprises like Apple and Nvidia, and what may be the only manufacturer capable of unlocking AI’s full potential.
That’s what TSMC is — an industry leader and foundational pillar of the AI boom.
Consider this…
TSMC already leads the industry with a 3-nanometer technology. That’s the size of a gap between nodes on a TSMC microchip. And it’s 1/1,000th the size of a strand of spider silk, which measures 3,500 nanometers.
Obviously, the more nodes one can fit on a chip, the more powerful it can be. And TSMC says it’s on track to have 2-nanometer (N2) production ready in the second half of this year. Microsoft Goes Nuclear
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That will be the most advanced technology in the semiconductor industry in both density and energy efficiency, further cementing TSMC as the go-to microchip manufacturer for the world’s leading tech companies and AI developers.
That’s not the only reason TSMC stock is poised to continue its climb in 2025, either. Higher prices for its products will also factor in.
Last year, Taiwan’s government hiked electricity prices for large industrial users, including TSMC.
That will increase the company’s input costs, for sure. But TSMC has made clear it expects its partners to help shoulder that burden.
“We expect our customers to share some of the higher cost with us, and we already started our discussion with our customers,” said TSMC CEO C.C. Wei.
Surely, if the past few years have taught us anything, it’s that corporations will use higher input costs to gouge consumers any chance they get. If their costs go up by 10%, they’ll charge consumers 20% more and call it fair.
There’s really not much you can do about it if you need their products. And when it comes to semiconductors, there’s more than enough demand for TSMC’s services among well-heeled customers like Apple and Nvidia.
The alternative would be to manufacture their own chips, which they’re not going to do, because they can’t.
At best, they could try to find another chip manufacturer — but again, almost none of TSMC’s competitors are capable of doing what it does.
That’s why TSMC makes 90% of the world’s most advanced processor chips.
It has all the leverage — and Wei knows it.
He even told Nvidia’s CEO right to his face…
“I did complain to Nvidia’s CEO, Jensen Huang — the ‘3 trillion guy’ — that his products are so expensive,” Wei said. “I think those products are really valuable for sure, but I am thinking about showing [him] our value as well.”
Indeed, TSMC is the sole production partner for Nvidia’s most advanced AI training chips, including its latest Blackwell line.
And given the price of Nvidia’s chips and TSMC’s vital role in their production, Wei says charging more for its services is a fairly obvious business strategy that “anyone sitting at home can think up.”
That’s just business. And Nvidia will accept it because it’s doing plenty well for itself.
Not only that, but other customers will accept it too, for the exact same reasons.
The world’s most powerful programs — AI or not — need the world’s most powerful chips. And TSMC makes them.
That, along with the investor buzz around AI and an increased focus on the “next Nvidia,” will be more than enough to carry TSMC stock to $1 trillion this year.
Hence my prediction last summer.
If anything, I’m guilty of being just a little bit early, as TSMC stock slipped to a low of $15.70 in August. But it’s up 56% since hitting that nadir.
Its current market cap is about $895 billion. So getting to $1 billion would only take another 12%–13% increase in value.
That shouldn’t take long to achieve.
Fight on,
Jason Simpkins
Simpkins is the founder and editor of Secret Stock Files, an investment service that focuses on companies with assets — tangible resources and products that can hold and appreciate in value. He covers mining companies, energy companies, defense contractors, dividend payers, commodities, staples, legacies and more...
In 2023 he joined The Wealth Advisory team as a defense market analyst where he reviews and recommends new military and government opportunities that come across his radar, especially those that spin-off healthy, growing income streams. For more on Jason, check out his editor's page.
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