There are currently only three companies with market caps above $3 trillion: Nvidia, Microsoft, and Apple. However, that list could easily expand over the next five years. One that I think could join this club by 2030 is Taiwan Semiconductor Manufacturing (TSM 1.44%).
Currently, Taiwan Semiconductor has a $1.2 trillion market cap, so a $3 trillion valuation would require the stock to rise by 150%. That would be a significant shift for a megacap company in just five years, but considering the massive tailwinds Taiwan Semiconductor has been experiencing, I think it's a no-brainer prediction.
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Taiwan Semiconductor is a key supplier in the AI realm
Taiwan Semiconductor is the world's largest chip foundry. It handles chip production for some of the most dominant names in tech, including Nvidia and Apple. Neither of those two has the capabilities to produce chips in-house; they design their chips internally, then outsource the fabrication to Taiwan Semiconductor.
Many times, Taiwan Semiconductor produces chips for companies that are direct competitors with each other, such as GPUs for both AMD and Nvidia, or the chips that power both Apple's iPhones and Google's Pixel phones. But because it isn't trying to market competing chips of its own designs, it can stay neutral.
Taiwan Semiconductor rose to the top of the chip foundry industry by continuously innovating and delivering excellent production yields. Currently, it is capable of producing 3-nanometer (nm) chips -- the most powerful, cutting-edge, and feature-dense chips being made commercially anywhere. However, in general, corporate customers aren't looking for increased computing speed right now. They're primarily concerned with power consumption, especially clients in the AI realm, where the electricity required to run massive data centers could become a limiting factor.
Later this year, Taiwan Semiconductor will start producing chips using its 2nm process node. Those chips will consume 25% to 30% less power when configured to run at the same speeds as 3nm chips. Beyond that, it is developing 1.6nm and 1.4nm chip nodes, which it anticipates will improve upon the 2nm chip node's power consumption by similar amounts.
The demand for 2nm chips looks to be staggering and could provide another growth boost to Taiwan Semiconductor. Considering its latest results, I'm also unsure whether it needs this boost, which could lead to even greater shareholder returns.
Growing data center capital expenditures will give TSMC a huge boost
In Q2, Taiwan Semiconductor's revenue rose 44% year over year in U.S. dollars. For Q3, management forecasts revenue of approximately $32.4 billion at the midpoint of its guidance range, which would be a 38% increase. That's an incredibly successful business, and its growth rate doesn't look to be slowing down anytime soon.
In the quarter, 60% of Taiwan Semiconductor's revenue came from its high-powered computing segment, indicating a massive demand for chips that go into products like Nvidia's GPUs, which are providing much of the key computing power that underpins the AI revolution. We've already seen announcements from the AI hyperscalers that they will set new records for data center spending in 2026. Furthermore, Nvidia told investors that it expects data center capital expenditures to reach $3 trillion to $4 trillion annually by the end of the decade, up from the $600 billion it expects in 2025.
That implies a 38% compound annual growth rate (CAGR) between now and 2030. Given that Taiwan Semiconductor is the primary manufacturer of nearly every high-powered computing chip that goes into an AI data center, it's not unrealistic to expect it to achieve that kind of growth rate.
If Taiwan Semiconductor did deliver a 38% CAGR in revenues over the next five years, and its shares followed suit, it would grow from a $1.2 trillion business to a $6 trillion one. A far more conservative estimate for a compound annual growth rate of around 25% would still allow the company to be worth $3 trillion by 2030.
Taiwan Semiconductor is one of the key players in the AI sector, and there is still immense upside for its stock, making it a top buy now.
