1 Unstoppable Chip Company That Could Soar to a $1 Trillion Valuation

1 week ago 5

Keithen Drury, The Motley Fool

Thu, Apr 10, 2025, 4:45 AM 4 min read

Although the marketplace is successful a downturn close now, I've inactive got my eyes connected the horizon. Depending connected the effects of tariffs, we could beryllium successful for immoderate much banal marketplace symptom implicit the adjacent fewer months, but if that timeline is stretched retired to 3 oregon 5 years, today's banal prices commencement to marque a batch much sense.

One spot banal that I'm excited astir is Taiwan Semiconductor Manufacturing Company (NYSE: TSM) -- oregon TSMC. I deliberation it could easy go a trillion-dollar institution successful a comparatively abbreviated clip frame. Its banal has gotten whacked alongside the marketplace and is present down astir 35% from its all-time high.

If you've got a semipermanent mindset, I deliberation today's terms looks incredibly attractive, arsenic the banal appears to beryllium ungraded cheap.

TSMC is the world's largest declaration spot shaper and produces chips for astir each of the large tech companies. None of its clients (like Apple or Nvidia) tin marque their ain chips, truthful they plan them and past outsource the accumulation to TSMC. This is simply a large presumption to beryllium in, arsenic TSMC doesn't request to interest astir selling its capabilities oregon products to clients.

It's already established arsenic the apical spot shaper successful the world, truthful it conscionable needs to absorption connected innovating. TSMC is besides a person successful spot technology, with industry-leading 3-nanometer (nm) spot accumulation capabilities. But it isn't stopping there, arsenic 2nm and 1.6nm spot nodes are acceptable to motorboat this twelvemonth and next.

However, each of this is for thing if President Donald Trump's tariffs harm TSMC. President Trump imposed a 32% tariff connected Taiwan, which would evidently origin the prices of chips to skyrocket. However, semiconductors are exempt from this tariff, truthful TSMC is successful the wide for now. The biggest situation TSMC faces with its chips is wide demand.

Leading into 2025, determination was a monolithic and increasing request for chips successful each facets of TSMC's business. Management gave guidance that AI-related gross volition grow astatine a 45% compound yearly maturation complaint (CAGR) implicit the adjacent 5 years, and wide gross would emergence astatine astir a 20% CAGR overall. Now that tariffs are successful effect, we person nary thought if this guidance has changed, but we'll perceive much from TSMC during its Q1 league telephone connected April 17.

The biggest interest is that weaker consumers volition person little spending power, which could origin them not to upgrade their smartphones oregon acquisition less items overall. This would alteration the currency flows of galore of the AI hyperscalers that would usage that wealth to bargain AI computing hardware. Demand for chips would drop, and TSMC would beryllium harmed.