10 Reasons to Hold This Tech Stock Forever

TSMC: A Leader in Semiconductor Manufacturing

Taiwan Semiconductor Manufacturing (TSMC) is the leading provider of ultra-advanced semiconductors, with a dominant position in the market. The company has consistently demonstrated strong performance and growth, making it a key player in the global technology sector. As of July 8, TSMC joined the elite group of companies with a market capitalization exceeding $1 trillion, showcasing its financial strength and long-term potential.

Market Leadership and Growth Potential

TSMC holds a significant market share in the semiconductor foundry market, estimated at around 70%, far surpassing its closest competitors. This dominance is unlikely to be challenged in the near future due to the high barriers to entry in the industry. The company's leadership is further reinforced by its ability to produce some of the most advanced chips used in cutting-edge technologies.

Strong Financial Performance

In the first quarter of the year, TSMC reported revenue of $25.5 billion, reflecting a 35% year-over-year increase. Net income also rose by 60% year-over-year, highlighting the company's robust financial health. TSMC's customers often enter into long-term contracts, which contribute to predictable revenue streams and provide stability for the company.

AI Chip Demand and Future Growth

The demand for artificial intelligence (AI) chips is surging, and TSMC is well-positioned to benefit from this trend. Management estimates that revenue from AI accelerators will grow at a compound annual growth rate (CAGR) of around 40% through 2029. This shift in demand has altered the landscape of TSMC's business, with AI-related chips becoming a significant contributor to its revenue.

Expanding Global Presence

To mitigate risks associated with geopolitical tensions, particularly between Taiwan and China, TSMC has been expanding its manufacturing operations beyond Taiwan. The company currently operates or plans to establish facilities in the U.S., Germany, and Japan, ensuring a more diversified production base and reducing dependency on a single region.

Investment in Future Growth

TSMC has been increasing its capital expenditures to meet rising demand, especially for AI chips. In 2024, the company spent just over $30 billion on capital expenditures, with projections for 2025 to reach between $38 billion and $42 billion. This investment is directly tied to growth opportunities, offering investors confidence in the company's long-term strategy.

Dividend and Total Returns

While TSMC is not primarily known as a dividend stock, it offers a modest dividend that complements its share price growth. The company's dividend yield is approximately 1.17%, slightly below the average for the S&P 500, but higher than the three-year average. Over time, this dividend can contribute to overall returns for long-term investors.

Advanced Semiconductor Manufacturing

TSMC holds a monopoly on producing the most advanced semiconductors, measured in nanometers (nm). The company leads in manufacturing nodes such as 5nm and 3nm, with upcoming 2nm technology expected to further solidify its position. Other companies struggle to match TSMC's efficiency and scale in producing these high-performance chips.

Long-Term Resilience and Adaptability

Since its founding in 1987, TSMC has navigated various economic cycles, technological advancements, and geopolitical challenges. The company has consistently adapted and positioned itself for sustained growth, demonstrating resilience and strategic foresight.

Considerations for Investors

While TSMC presents a compelling investment opportunity, investors should carefully evaluate their options. Some analysts have highlighted other stocks that may offer even greater returns. For example, past recommendations from advisory services have led to substantial gains for early investors. With a track record of outperforming the S&P 500, such services continue to identify promising investment opportunities.

Investors interested in exploring alternative options can look into the latest recommendations from expert analysts. These insights can help guide decisions and potentially unlock significant value in the evolving tech landscape.