Prediction: This Magnificent Artificial Intelligence (AI) Chip Stock Will Be Worth $2 Trillion in 5 Years

Semiconductor stocks person been successful awesome signifier connected the marketplace implicit the past 3 years, arsenic the request for chips utilized for grooming and deploying artificial quality (AI) models successful information centers has changeable up remarkably during this period.

Not surprisingly, the PHLX Semiconductor Sector index's gains of 44% successful the past 3 years person been higher than the 29% leap clocked by the tech-laden Nasdaq-100 Technology Sector scale implicit the aforesaid period. Taiwan Semiconductor Manufacturing (NYSE: TSM), oregon TSMC, has been 1 of the large beneficiaries of the spurt successful semiconductor spending, with its shares rising 69% successful the past 3 years (as of this writing).

TSMC's coagulated rally has brought its market cap to $980 billion. The bully portion is that this semiconductor bellwether seems susceptible of delivering much upside successful the agelong tally arsenic well, and it whitethorn adjacent deed $2 trillion successful marketplace cap.

Let's look astatine the reasons why.

It is casual to spot wherefore TSMC banal has changeable up. The institution fabricates chips for each the large spot designers, including Nvidia and AMD. In fact, each the fabless chipmakers that person been designing AI chips are utilizing TSMC's fabrication plants to nutrient their chips.

Consumer electronics companies specified arsenic Apple that are looking to connection AI solutions to their customers successful their devices besides pat TSMC to manufacture precocious processors. All this explains wherefore the Taiwan-based foundry elephantine has seen a crisp uptick successful its maturation successful the past year.

More importantly, TSMC's ascendant 64% stock of the planetary foundry marketplace means that it is well-placed to marque the astir of the secular maturation successful the AI spot marketplace implicit the agelong run. According to 1 estimate, the planetary AI spot marketplace could scope an yearly maturation complaint of astir 35% implicit the adjacent decade. The market's awesome maturation is expected to beryllium powered by the penetration of AI into aggregate industries ranging from healthcare to concern to automotive, among others.

As TSMC manufactures chips for the starring spot designers serving these industries, including the likes of Qualcomm and Broadcom, the institution should ideally beryllium capable to prolong the steadfast maturation that it has been clocking successful the past year. This is precisely what absorption pointed retired connected the company's January earnings league call:

Underpinned by our exertion enactment and broader lawsuit base, we present forecast the gross maturation from AI accelerators to attack a mid-40% CAGR for the five-year play starting disconnected the already higher basal of 2024. We expect AI accelerator to beryllium the strongest operator of our HPC level maturation and the largest contributor successful presumption of our wide incremental gross maturation successful the adjacent respective years.