Harsh Chauhan, The Motley Fool

Fri, Jun 6, 2025, 2:15 PM5 min read

• The proliferation of AI in the smartphone, PC, and data center markets, among others, is providing a massive tailwind for foundry giant Taiwan Semiconductor Manufacturing.

• A huge addressable market and the company's improving share in the Foundry 2.0 space are likely to lead to stronger revenue growth over the next five years.

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Taiwan Semiconductor Manufacturing (NYSE: TSM) is one of the most important players in the global semiconductor industry, as it fabricates chips for many of the top fabless chipmakers and consumer electronics giants.

The Taiwan-based powerhouse holds a dominant 67% share of the global third-party foundry market; second-place Samsung (which also produces its own chips in-house) has just 11% of the third-party foundry space. Moreover, TSMC's foundry market share has risen steadily from 58% a couple of years ago to where it is now. Looking ahead, the growing demand for artificial intelligence (AI) chips could provide tremendous upside for TSMC, sending its market cap well above its current level of just over  $1 trillion.

Indeed, I believe TSMC could triple its market cap in the next five years.

TSMC's advanced processing nodes are being used by numerous companies, including Nvidia, Broadcom, Marvell, AMD, and Apple, to fabricate AI-capable chips that go into data centers, personal computers, and smartphones. This puts TSMC firmly at the center of the trend of growing adoption of AI across multiple end markets.

According to one estimate, the global AI chip market could clock annualized growth of 35% through 2033 as the technology filters through to more applications. TSMC itself is forecasting that its revenue from selling AI accelerators designed by the likes of Nvidia, AMD, Broadcom, and Marvell could register a compound annual growth rate in the mid-40% range over the next five years.

Throw in the proliferation of AI in other technologies such as smartphones, PCs, vehicles, and the Internet of Things (IoT), and it becomes obvious that this chipmaker is on track for terrific and sustained growth. For instance, according to a forecast by research firm Market.Us, shipments of generative AI smartphones and PCs are expected to grow at a compound annual rate of 35% through 2029, and the deployment of AI in the automotive industry is expected to grow at a similar rate.

Not surprisingly, TSMC is investing aggressively to upgrade its chip manufacturing and packaging capacity to make the most of the rising AI-driven demand in the semiconductor market. It is on track to invest a total of $165 billion in the U.S. alone to build advanced chip fabrication facilities, packaging plants, and a research and development center.