Taiwan Semiconductor (NYSE:TSM) stock is the backbone of the burgeoning semiconductor industry. As the world’s leading contract chip manufacturer, TSMC produces the chip that powers everything from smartphones and laptops to advanced AI applications and electric vehicles (EVs).
Wall Street remains bullish on the company’s growth prospects in FY24, as AI tailwinds suggest strong growth ahead. Management forecasted 20% revenue growth in 2024, driven by increased demand for high end AI GPUs. With a strong track record, strategic investments, and a booming market for advanced semiconductor chips, TSMC presents a compelling opportunity for investors in 2024.
Riding the Artificial Intelligence Wave
Artificial intelligence is rapidly transforming industries as we know it, and its growth hinges on the powerful semiconductor chips. TSMC is well positioned to capitalize on this long term trend, given the nature of their operations.
The company is a major supplier of leading AI chip companies like Nvidia (NASDAQ:NVDA) and AMD (NASDAQ:AMD), who require the most advanced chips for their products. With the industry moving at such a fast pace, their customers are in need of rapid scaling ability and time to market to meet the demands.
According to AMD, the AI GPU market will reach a staggering $400 billion by 2027, growing at a 70% CAGR. TSM stock is already investing significant CAPEX to expand its production capacity, ensuring they’re well equipped to their customers needs. As AI adoption accelerates in 2024, the demand for TSMC’s advanced chips will translate into significant revenue and EPS growth.
Global Monopoly on Cutting-Edge Foundry Services
The chip shortage that plagued various industries in the past few years highlighted the crucial role of foundries like TSMC stock. Unlike companies like Intel (NASDAQ:INTC) who design their own chips, TSMC focuses solely on the manufacturing process. This has allowed them to specialize and become the most important company in the semiconductor industry.
Currently the company holds more than 50% market share in foundry services. This monopoly gives them a clear competitive advantage and significant pricing power. Furthermore, TSMC’s more than 3 decades of experience has made them the preferred partner for companies developing advanced AI chips.
There obviously exists competition like Samsung and GlobalFoundries (NASDAQ:GFS), however, they do not have nearly the same market dominance. They are also set to benefit from the U.S. Chips & Science Act, after being awarded a blockbuster $5 billion grant to build a new fabrication plant in Arizona. TSMC is also making strategic investments in Europe and Asia, with new planned advanced fab facilities in Germany and Japan.
TSM Stock: Long Term Growth Prospects In Tact
While recognizing the significant market opportunities in advanced AI chips, TSMC stands to be a significant beneficiary. They continue to make strategic investments to solidify their position in manufacturing advanced semiconductor chips.
It is not just just AI chips that will fuel growth over the next decade, it will also fuel the burgeoning global electronics industry. This includes meeting the rapid demands of IoT and 5G technologies as the world sees the biggest transition in history.
Management has already guided more than 20% revenue growth in the 2024 fiscal year, and TSM stock remains a key enabler of AI applications. The company’s market dominance, strategic investments, and alignment with the booming AI market positions them for long term growth.
On the date of publication, Terel Miles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.