TSM stock becomes 9th company to crack $1T market cap

Taiwan Semiconductor Manufacturing (TSM) is surging again, catapulting the Asian chipmaker back to a trillion-dollar market cap on the strength of growing AI demand.

TSM stock rose 1.4% to $194.60 on Dec. 11, snapping a three-day skid. TSM stock is up more than 86% this year, including a record-high closing price in October.

With the recent gain, TSM has rejoined the $1 trillion tier of companies, which includes giants such as Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), and Nvidia (NVDA).

TSM’s performance this year is primarily attributed to strong revenue and earnings growth that have exceeded market expectations.

For its most recent quarter, the company reported a 12.8% increase in revenue to $23.5 billion. In New Taiwan dollar terms, TSM's revenue increased 34% in November.

The company’s profitability also improved, with gross margin increasing by 4.6 percentage points to 57.8% and operating margin climbing by 5 percentage points to 47.5%.

Like Nvidia, Taiwan Semiconductor has attracted investors who are keen on tapping into the growing AI industry. Although both companies are benefiting from the AI boom, they operate different business models and aren’t seen as competitors in the traditional sense.

A deeper dive into TSM and NVDA

Unlike Nvidia, TSM is considered a “semiconductor foundry” that manufactures chips for other companies. Nvidia is one of TSM’s largest customers, accounting for 11% of the foundry’s revenues as of 2023.

As MIT Senior Fellow John Werner recently explained, TSM is set to double its production capacity in 2025, with Nvidia taking more than half of that new supply.

NVDA is a shinier stock thanks to the company’s massive growth in recent years, but TSM is considered a more diversified company thanks to its exposure to the smartphone and PC markets. Case in point: Apple and Qualcomm also rely on TSM for their chips.

So, while Nvidia is the fastest horse in the race, Taiwan Semiconductor Manufacturing covers a wider swath of the semiconductor market. For this reason, it may play a bigger role in the AI chip market.

This is likely why a 2024 New York Times op-ed referred to TSM as the "most important company in the world," and Wedbush Securities Senior Vice President Matt Bryson said, "There’s no alternative to Taiwan Semi."

Bryson refers to TSM’s expanding global presence, major industry partnerships, and massive capital expenditure plans in 2024.

While TSM planned to spend up to $40 billion this year, the company expects AI chip revenues to grow at a compound annual growth rate of 50% by 2027.