Here's 1 Trillion-Dollar Artificial Intelligence (AI) Chip Stock to Buy Hand Over Fist While It's Still a Bargain

Company Overview - Taiwan Semiconductor Manufacturing (TSMC) has joined the trillion-dollar market capitalization club after its stock surged 90% in 2024, increasing its market cap from approximately $500 billion to over$1 trillion [1][2] - The company's stock price reached $223, nearing an all-time high, and its forward price-to-earnings (P/E) ratio stands at 25, slightly above the S&P 500 average of 24 [6][7] Financial Performance - TSMC's revenue growth accelerated significantly over the past year, with year-over-year (YOY) growth rates of 16 5% in Q1 2024, 40 1% in Q2 2024, 39 0% in Q3 2024, and 38 8% in Q4 2024 [3] - Earnings per share (EPS) growth also showed strong momentum, with YOY increases of 8 9% in Q1 2024, 36 3% in Q2 2024, 54 2% in Q3 2024, and 57 0% in Q4 2024 [3] - The company's gross margin expanded, driving robust earnings growth and contributing to its soaring stock price [3] Industry Trends and Growth Potential - Hyperscalers like Microsoft, Alphabet, Amazon, and Oracle are planning significant investments in AI infrastructure, which will require TSMC's leading foundry operations [4] - TSMC is well-positioned to capture a substantial share of AI-related spending as new data centers and chipware emerge, supported by its strong revenue and EPS growth projections [5][9] - The company's valuation expansion is seen as appropriate, reflecting a normalization after trading at a discount compared to other chip companies for an extended period [9] Investment Perspective - Despite its rapid stock price appreciation, TSMC's valuation remains reasonable when analyzed using earnings-based methodologies, given its accelerating top- and bottom-line growth [7][8] - The company's EPS growth is outpacing its sales growth, further justifying its current valuation and making it an attractive option for growth investors [8][9] - Secular tailwinds in the AI industry are expected to sustain TSMC's leading position in the chip sector, supporting continued revenue and earnings growth in the coming years [9]