We recently published a list of 10 High Growth Semiconductor Stocks That Are Profitable Heading into 2025. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against other high growth semiconductor stocks that are profitable.
Semiconductors have led industrial advancements and aided key applications such as personal computing, data centers, and cloud computing. As per PwC, Memory ICs were the fastest-growing semiconductor category over the previous 2 decades, with DRAM and HBM standing out. The broader DRAM market is supported by cost and scale, while HBM, because of its advanced technological requirements, reflects a high-barrier, closed-loop ecosystem.
Global Semiconductor Sales Rose 20.7% YoY in November 2024
The Semiconductor Industry Association (SIA) announced that global semiconductor sales touched $57.8 billion during November 2024 month, demonstrating 20.7% growth as compared to November 2023 total of $47.9 billion and 1.6% growth as compared to the October 2024 total of $56.9 billion. As per the report published by SEMI (Semiconductor Equipment and Materials International), the semiconductor industry is expected to begin 18 new fab construction projects in 2025. These new projects will include three 200mm and fifteen 300mm facilities. Notably, the majority will begin operations from 2026 – 2027.
In 2025, the Americas and Japan will be the leading regions with 4 projects each. Next, China and Europe & Middle East regions have 3 planned construction projects. Finally, Taiwan has 2 planned projects, with Korea and Southeast Asia having 1 project each for this year. As per SEMI’s President and CEO, investments have been fueling leading-edge and mainstream technologies to cater to dynamic global demands. Gen-AI and high-performance computing continue to fuel advancements in the leading-edge logic and memory segments. However, mainstream nodes have supported crucial automotive, IoT, and power electronics applications.
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Semiconductor Capacity to Ramp Up
SEMI projects semiconductor capacity to accelerate further, with a 6.6% yearly growth rate to a total of 33.6 million wafers per month (wpm) for 2025. This expansion is expected to primarily stem from leading-edge logic technologies in high-performance computing (HPC) applications and higher penetration of generative AI in edge devices. Overall, the broader semiconductor industry continues to focus on building advanced computing capabilities, and responding to the increased computational demands of LLMs.
Moving forward, foundry suppliers are expected to be the leaders in purchases of semiconductor equipment. The Foundry segment can increase capacity by 10.9% YoY, increasing from 11.3 million wpm in 2024 to 12.6 million wpm in 2025.
Our Methodology
To list the 10 High Growth Semiconductor Stocks That Are Profitable Heading into 2025, we conducted extensive research and scanned through several online rankings to shortlist companies having ~10% revenue growth over the previous 5 years and TTM net income of at least $400 million. We also mentioned the hedge fund sentiments around each stock, as of Q3 2024. Finally, the stocks were ranked in ascending order of their hedge fund sentiments.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a complex network of integrated circuits used in logic semiconductors.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
5-year Sales Growth: ~22.02%
TTM net income: $35,710.5 Million
Number of Hedge Fund Holders: 158
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) manufactures, packages, tests, and sells integrated circuits and other semiconductor devices. Bernstein analysts gave a positive outlook on the company’s shares, reiterating their “Outperform” rating and a price target of $258.00. The firm’s analysts lauded Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s strong positioning in the semiconductor industry, mainly in the data-center AI sector, which can become a significant growth driver through 2025.
As per Bernstein, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is expected to benefit from the growing demand for high-bandwidth memory (HBM), which can tighten the capacity for mainstream memory production. The analysts at the company expect a positive shift in the memory sector around the middle of the year, courtesy of strong AI and HBM demand. Notably, AI has emerged as a significant growth driver for the company, with strong performance anticipated to continue into 2025. In Q1 2025, the company expects its business to be impacted by smartphone seasonality, which can be partially offset by continued growth in AI-related demand.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) expects revenue of between US$25.0 billion and US$25.8 billion in Q1 2025. Wedgewood Partners, an investment management company, released its Q4 2024 investor letter. Here is what the firm said:
“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was another top contributor to performance during the quarter and for the year. The Company’s earnings growth dramatically accelerated compared to last year as the Company’s wafer fabrication and packaging volumes soared in 2024. In addition, the Company customer prices rebounded in the face of more normalized capital expenditures. The Company maintains a near-monopoly in the fabrication of nearly every new AI accelerator brought to market over the past two years. They continue investing tens of billions to build and fill future capacity with orders for what seems to be insatiable hyperscale demand for accelerated computing. The stock ended the year trading at a consensus forward earnings multiple that is several points lower than large cap growth benchmarks, despite the Company’s dominant position in the most important industry that is driving one of the largest technological shifts in a generation.”
Overall, TSM ranks 2nd on our list of high growth semiconductor stocks that are profitable heading into 2025. While we acknowledge the potential of TSM as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than TSM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.