Demand for Chips Shows No Signs of Slowing. Is Taiwan Semiconductor Too Expensive Now?
With TSMC controlling 70% of the global foundry market, its stock has risen dramatically throughout the AI chip craze.
The artificial intelligence (AI) chip craze cannot be ignored without considering the dominant force, Taiwan Semiconductor Manufacturing Company (NYSE: TSM). This third-party chip manufacturer has been one of the top-performing stocks in the past year, surging nearly 80%. Consequently, TSMC's valuation has soared past the $2 trillion mark. However, investors are now questioning whether the chip boom will endure. Is TSMC now priced too high?
TSMC's growth has been remarkable. In the second quarter, its revenue increased by 36% year-over-year, while its net income and diluted earnings per share climbed 77.4%. The company's robust free cash flow has resulted in an impressive balance sheet, and its dividend payouts have more than doubled over the past three years. Demand for chips is not dwindling, and TSMC is also exploring new avenues.
For instance, it is currently establishing a joint venture with Sony (NYSE: SONY) to manufacture next-generation image sensors. This multibillion-dollar partnership will supply high-performance camera sensors for iPhones and upcoming physical-AI applications. The companies aim for mass production by 2029.
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