The Semiconductor Sovereign

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It is, of course, a vulgar thing to speak of fortunes in mere numbers. Yet, even the most refined palate must acknowledge the artistry in a well-constructed balance sheet. The usual suspects – Alphabet, Microsoft, Amazon – are, as always, accumulating wealth, driven by this insatiable appetite for artificial intelligence. They build their empires on cloud computing, a rather ethereal foundation, wouldn’t you agree? Nvidia provides the glittering baubles – the graphics processing units – that power these digital dreams. And Apple, with its customary discretion, quietly profits from the whole affair. But the true sovereign of this new realm, the one who truly holds the keys to the kingdom, is a name less often on the lips of the financial press.

Taiwan Semiconductor Manufacturing – TSM, as the market so prosaically abbreviates it – is the silent partner to all these grand ambitions. The spending of these hyperscalers, Nvidia’s relentless pursuit of more advanced silicon, Apple’s preparations for a generative AI future – it all, inevitably, flows towards this one company. One might say it’s a rather unglamorous position, being the foundation upon which others build their castles. But a foundation, my dear reader, is precisely what prevents everything from collapsing into ruin.

The stock, briefly flirting with a $2 trillion valuation, has since retreated with a becoming modesty. A mere $1.8 trillion, you understand. A trifle, really. Yet, a 97% ascent in the past year suggests a certain…momentum. I daresay it won’t be long before it reclaims its former glory, and ascends to heights yet unseen. One should always invest in inevitability, you see.

Powering the Most Advanced Chips

TSMC is, quite simply, the largest contract chip manufacturer in the world. The gap between it and the competition isn’t merely widening; it’s becoming a chasm. In 2025, it accounted for nearly 70% of all spending by the likes of Nvidia and Apple. Samsung, trailing far behind at a mere 7%, is a distant, and increasingly irrelevant, footnote. It’s a lesson, wouldn’t you agree, in the virtues of focused expertise?

And this dominance isn’t accidental. TSMC’s technological lead is substantial, and growing. Its 2nm process entered mass production at the end of 2025, with capacity booked solid well into 2027. Samsung, predictably, is attempting to catch up, improving yields with commendable, if ultimately futile, effort. But capacity is a cruel mistress, and TSMC possesses it in abundance. Furthermore, TSMC’s intellectual property library and packaging capabilities are unmatched. Switching costs, my dear reader, are a delightful thing for those who hold the advantage.

As a consequence, TSMC is able to dictate terms. A price increase of 3% to 10% on its most advanced processes at the start of 2026? Perfectly reasonable. Reports suggest further increases through 2029. A company that understands its own worth is a beautiful thing to behold. It’s a simple principle, really: demand exceeds supply, and those who control the supply control the narrative.

The company is, naturally, investing heavily to meet this demand. Between $52 billion and $56 billion in capital expenditures this year, up from $40.9 billion last year. New facilities in Arizona, mitigating geopolitical risks, are a prudent, if expensive, undertaking. One must, after all, prepare for every eventuality, even the unpleasant ones. Though, one suspects, the Taiwanese facilities remain significantly more cost-effective. A fact that will undoubtedly influence pricing strategies in the years to come.

The Path to $2 Trillion

With Amazon, Microsoft, and Alphabet continuing to pour resources into data centers, and Apple’s iPhone remaining stubbornly popular, TSMC appears poised for another strong year. Management is guiding for 30% revenue growth in U.S. dollar terms, with improvements in gross margin expected in the first quarter. Revenue is already up 30% on a neutral basis, in line with expectations. Though, one notes, the weakening dollar provides a convenient tailwind. A fortunate circumstance, wouldn’t you say?

Management now anticipates a compound annual growth rate of 25% through 2029, with a 36% increase expected this year and 30% growth projected for 2026. And, knowing their customary conservatism, one suspects this is a deliberately understated estimate. There is, after all, always room for pleasant surprises. One should always appreciate a touch of modesty, even in a forecast.

With strong demand for both its 3nm and 2nm processes, and planned price increases, TSMC should be able to maintain high gross margins, even as it ramps up next-generation production. Earnings growth, therefore, is likely to outpace top-line growth. A most desirable combination. It is, after all, not merely about how much one earns, but how efficiently.

TSMC shares, therefore, deserve a multiple well above the current 24 times analysts’ expectations. A multiple of 27 would push its market cap comfortably above $2 trillion. Geopolitical risks, of course, weigh on the valuation. But even a modest multiple, coupled with continued earnings growth, will inevitably propel its value beyond that symbolic threshold. The market, after all, has a curious habit of rewarding inevitability. It is, as always, a matter of discerning the truly valuable from the merely fashionable.

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2026-03-15 12:42