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Taiwan Semiconductor Manufacturing (TSMC) and Broadcom (AVGO) are poised to join Nvidia in the Trillion Dollar Club. Discover how advancements in AI and technology are driving the market forward.
The global semiconductor industry continues to offer more avenues of growth as evidenced by the 15.8% year-on-year (YoY) growth in April 2024. The growing integration of artificial intelligence and technology in our daily lives has increased the usage of microchips. This provides two companies the chance to become the next ones to join the Trillion Dollar Club as of Nvidias.
Nvidia has around 80% of global AI chip market share. Still, the growing use of graphics processing units (GPUs) and AI chips provides further opportunity for two other companies to join the chip-making giant in the same rank.
TSMC: Taiwanese Giant with Great Perspectives
One of these companies is Taiwan Semiconductor Manufacturing (TSMC), the largest chip-making facility in the world. Major companies like Nvidia outsource the manufacturing process to TSMC, which offers technology that can produce more powerful, faster, and energy-efficient chips.
Another interesting and positive factor is that TSMC produces not only AI-based chips but extends to overall semiconductors which help in increasing the computing power in various devices and machines.
According to various estimates, the company’s AI-related growth will increase by 50% annually for the next five years. In fact, as early as 2028, management believes that 20% of its total sales will be AI chips. The projections below show that by 2028, TSMС sales will reach $145.4 billion, out of which $34.8 billion will be in AI chips. TSM has also announced that its 3-nanometer process (N3P) will be able to compete with Intel’s 18A.
If TSMC is able to achieve $85 billion in sales in 2024, then that would render its market capitalization over $1 trillion. The growth prospects are promising, as its current sales multiple is at a premium against its 5-year average sales multiple of 8.3—investors expect the company’s shares to bounce 10% from their current levels.
Broadcom: Another Major Chip Competitor
The other competitor is Broadcom (AVGO). Similar to TSMC, it has multiple uses for its high-end chips. The company recently announced a 10 to 1 stock split as the Q2 earnings came better than expected.
The company is building AI chips that focus on networking and movement of large amounts of data. It also develops other microchips for broadband access, data storage, and smartphones. Broadcom’s chips are considered to be best for networking and other functions that require highly advanced engineering capabilities. The company spent more than $5 billion on its research and development last year.
To expand its business and tap into new markets, the company recently acquired VMware for a whopping $69 billion. After the acquisition, the company is now poised to lead in the mainframe-based software and virtualization.
In a recent note, Bank of America anticipated that the company’s share price would increase to $2000 and the sales could reach $59.9 billion in 2025. If it happens, the numbers will be 16% higher than last year. That said, the company’s overall valuation might surpass $1 trillion, placing it amongst the other giants such as Alphabet, Amazon, Meta, Microsoft, and Nvidia.
Overall State of Semiconductor Industry
With a compound annual growth rate of 39%, the global AI chip market is expected to grow from $103 billion in 2023 to $1.03 trillion by 2030.
Companies like TSMC and Broadcom stand a realistic chance at increasing their sales by exploring new business avenues (such as GPUs), field programmable gate arrays (FPGAs), and machine learning. It is only a matter of time before the $1 trillion club has to make room for the two new members.
