TSMC has a high degree of dominance in advanced logic chip manufacturing. (Illustration, AFP)
[Financial Channel/Comprehensive Report] As the global AI craze continues to heat up, the construction of AI data centers has driven the rapid growth of demand for advanced chips. Taiwan Semiconductor Manufacturing Co., Ltd. (TSMC), the world's leading foundry, has also become one of the main beneficiaries of this industrial trend. The investment media "The Motley Fool" believes that TSMC's current industrial status and technological advantages still enable it to achieve long-term growth. If profits can grow in line with market expectations in the next few years, there may still be considerable room for the stock price to rise. The report predicts that TSMC ADR's stock price can reach US$678 by the end of 2027, and now may be an excellent buying opportunity.
"The Motley Fool" pointed out that one of the current issues that the market is most concerned about in the AI industry is when the large-scale construction of data centers will slow down. However, recent information released by relevant industry figures shows that this investment boom may still take a long time to end.
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Broadcom, one of TSMC's important customers, has recently talked about the demand outlook for 2029 at a conference; in addition, multiple industry forecasts also believe that global data center construction may continue until around 2030.
TSMC also stated that the current demand outlook for 2029 to 2030 is still "very strong." Even if the demand for AI data centers begins to slow down in the future, chip demand may shift to other emerging industries, forming the next wave of growth momentum.
TSMC has continued to expand its production capacity recently, which also reflects the company's confidence in long-term demand. The company has announced additional investments to expand its manufacturing facilities in Arizona, USA. Such large-scale capital expenditure means that TSMC still has high confidence in future demand for advanced chips. If the company believes that market demand is about to decline sharply, it is obviously unlikely that it will continue to invest such a huge amount of funds to expand production capacity at this time.
As fundamentals continue to be promising, TSMC's current valuation has also become the focus of market attention. TSMC's current price-to-earnings ratio is about 31 times. Market analysts believe that such a valuation is still reasonable considering its important position in the global semiconductor industry, its advantages in advanced process technology, and its huge orders from major global technology companies.
According to analyst estimates, TSMC’s median earnings per share (EPS) in 2027 will be approximately $21.86. If TSMC can reach this profit level by then, and the market still gives it a price-to-earnings ratio of about 31 times, the calculated theoretical stock price will reach about $678. Based on the stock price of about $435 at the time of writing, the potential increase is more than 55%.
Of course, $678 is not an inevitable target for TSMC’s stock price, but it is based on a situation where profits and valuation are in line with expectations. The actual stock price will still be affected by factors such as global economic prosperity, semiconductor industry cycle, AI capital expenditures, geopolitics, and changes in market price-to-earnings ratios. However, if the demand for AI data centers can continue from 2029 to 2030, and is further taken over by emerging applications such as robotics and autonomous driving, TSMC’s growth space in the next few years is still worth the market’s expectations.
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