1 Trillion-Dollar Artificial Intelligence (AI) Chip Stock to Buy While It’s Still Bargaining

There are currently 10 public companies in the world boasting a market capitalization of more than $1 trillion. Among the new entrants into the trillion dollar club is chip stock. Taiwan Semiconductor Manufacturing (NYSE: TSM ).

In the year By 2024, the company, also known as TSMC, will acquire 90%—essentially doubling the company’s market value from $500 billion to more than $1 trillion. Sure, that’s the biggest price increase in 12 months, but what if I told you the stock is still a bargain?

Below, I make the case for why TSMC is attractively valued and why it should be on the radar of growth investors.

In the table below, you can see TSMC’s revenue and profit annual growth figures for the past several quarters.

Data Source: Taiwan Semiconductor YoY = Year Over Year.

Over the past 12 months, TSMC has rapidly accelerated its top-line growth. More importantly, the company’s gross margin is expanding, leading to strong revenue growth. With a financial profile like this, it makes sense that TSMC shares are soaring to new highs.

Moreover, industry trends indicate that the company’s long-term growth potential appears similarly strong. such as hyperscalers Microsoft, Alphabet, AmazonAnd Oracle All plan Spending billions on AI infrastructure Over the next several years, this will require TSMC to lead foundational operations.

In my view, the above revenue and earnings estimates suggest that TSMC is well positioned to continue to contain high AI spending as new data centers and chipsets come into place.

However, even with impressive revenue and earnings-per-share forecasts, TSMC stock is too expensive.

It’s easy to believe you missed the boat with TSMC already. Stocks won’t rise at a 90% rate forever, and a trillion-dollar valuation might give the illusion that TSMC shares don’t have much higher to go.

As of this writing, the stock is trading at $223 — an all-time high. Looking at TSMC’s rising momentum may suggest the stock is overvalued.

However, TSMC’s price-to-earnings ratio (P/E) ratio is only 25, as the stock price has risen sharply. I say “only” because it is the average forward P/E. S&P 500 It is 24.

As I mentioned in the chart and graph in the previous section, TSMC is a rare example of a business that is accelerating top-line and bottom-line growth. More importantly, the company’s EPS growth is growing faster than sales. This is important to understand because when you analyze TSMC using earnings-based methodologies, the company’s valuation starts to look more reasonable.

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