Could investing $10,000 in TSMC make you a millionaire?

The last decade has been a rewarding one Taiwan semiconductor manufacturing (TSM -1.44%) Investors, as the foundry giant’s shares have risen an incredible 706% over that period, turning a $10,000 investment in the stock 10 years ago into just over $80,000 at the time of this writing.

TSM data from YCharts

Popularly known as TSMC, the Taiwan-based company has benefited from secular growth in the semiconductor space over the past 10 years. Therefore, anyone who bought $10,000 worth of TSMC stock a decade ago with the goal of building a million-dollar portfolio will be happy with their investment.

But what if you want to build a diversified million-dollar portfolio now and have $10,000 in investable cash (after you’ve paid off your bills, paid off your high-interest loans and saved enough for tough times) to buy shares in this semiconductor giant buy? ? Should you put that money into TSMC stock with the expectation that it can repeat its past performance over, say, the next 10 to 15 years?

Let’s find out.

The long-term growth of the semiconductor market will provide TSMC with a long-term tailwind

According to McKinsey, the global semiconductor market could reach $1 trillion in annual sales by 2030, up from $600 billion in 2021. Some estimates are even more optimistic. Precedence Research, for example, predicts that the semiconductor industry could generate more than $2 trillion in revenue by 2032 if it grows at nearly 15% annually.

Such rosy estimates can be attributed to the rapidly increasing demand for chips in numerous industries, from data centers to smartphones and personal computers to factories and cars. All of these semiconductor markets are expected to be positively impacted by the increasing adoption of artificial intelligence (AI).

Precedence Research predicts that AI chips alone could generate nearly $928 billion in annual revenue by 2034, with an annual growth rate of 29%. TSMC offers investors one of the best ways to capitalize on this enormous opportunity in the semiconductor market. Because when major semiconductor and consumer electronics companies want to make their chips, they turn to TSMC.

TSMC is the world’s largest semiconductor manufacturer. The company has a 62% share of the foundry market, while its nearest competitor only has an 11% market share. Fabless chip manufacturers such as Nvidia, Broadcom, Marvell, Qualcomm, Advanced micro devices, Micron technologyand device manufacturers like Apple And Sony Have TSMC make your chips.

The company notes that in 2023 it “served 528 customers and manufactured 11,895 products for various applications.” This huge and diversified customer base, as well as the overall growth of the semiconductor market, tells us why TSMC has grown incredibly quickly this year. The company’s revenue increased 31.5% in the first 10 months of 2024 compared to the same period last year.

TSMC is expected to maintain this momentum in the final two months of the year, with management indicating in the October earnings call that it expects revenue to rise nearly 30% in 2024. TSMC is expected to maintain healthy growth rates in the next few years.

TSM revenue estimates for current fiscal year data from YCharts

Additionally, TSMC’s healthy revenue growth will lead to an impressive increase in profit.

TSM EPS estimates for current fiscal year data from YCharts

We’ve already seen the incredible opportunities that TSMC offers thanks to the semiconductor industry, and the good thing is that the company is expected to maintain its dominance in this market for a long time to come. As Tom’s Hardware reports, TSMC is expected to maintain its excellent lead in the foundry market until at least 2032.

This will come as no surprise as TSMC is aggressively investing capital into developing more manufacturing facilities and attempting to stay ahead of competitors such as TSMC by developing advanced chip nodes. B. to stay at the top Intel And Samsung.

Solid long-term growth could lead to strong share price increases

TSMC ended 2023 with a profit of $5.18 per share. The previous chart shows that the company’s earnings could rise to $10.35 per share in 2026. That would equate to a three-year compound annual growth rate (CAGR) of nearly 26%.

Assuming that TSMC can maintain even a 15% annual earnings growth rate over the next decade, the bottom line, after taking into account potential competition and headwinds in the semiconductor industry, could reach $20.95 per share at the end of 2033 (using the Profits from 2023). . TSMC has a five-year average price-to-earnings ratio of 22, which is lower than the tech-heavy company Nasdaq-100 Index profit multiplier of 33.

If the market decides to reward the company’s healthy growth with a higher earnings multiple and TSMC trades at even 30 times earnings after a decade, the share price could reach $628. That would be a 239% increase from current levels. So a $10,000 investment in TSMC could be worth more than $33,900 after 10 years, which is why the stock looks like a good choice for investors looking for building blocks to build a million-dollar portfolio.