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Taiwan Semiconductor Manufacturing Company (NYSE:TSM) is a key player in the artificial intelligence (AI) market. It dominates the foundry market, with a market share of around 70%. It's the go-to foundry for many top tech companies, and thus, if demand for AI chips is growing, that's great news for Taiwan Semi.
This year, the tech stock is up around 50%, recently hitting a new all-time high due to the hype and excitement around its business. At around $2.3 trillion in market cap, however, it's also among the most highly valued stocks on U.S. markets. The big question investors may have is whether the stock has gotten too expensive. Is it too late to invest in Taiwan Semi?
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Taiwan Semi is expected to release its full quarterly results for its most recent period on Thursday. The numbers are likely to be strong, with analysts expecting that for a sixth consecutive quarter, Taiwan Semi will post record earnings, thanks to AI-driven demand. The expectation is that profits will be up by 65%, totaling $23.4 billion.
The tech company recently announced that its revenue thus far in 2026 has risen by more than 40%. Meanwhile, with tech spending remaining feverish as companies try to stay ahead of their rivals in AI development, the outlook is likely to remain fairly strong for Taiwan Semi in the foreseeable future, as demand doesn't appear to be slowing anytime soon.
Although Taiwan Semi's business is booming, its valuation arguably isn't all that high. The tech stock is trading at a forward price-to-earnings multiple of 21 (based on analyst expectations). That's only modestly higher than the S&P 500 average of around 20. For a top growth stock such as Taiwan Semi, a premium is definitely warranted.
While there have been efforts to bring more chip-building capabilities to the U.S., Taiwan Semi has a huge advantage with expertise and low-cost production that may be difficult for any company to match. Thus, it may still command significant market share in the years to come, enabling it to continue to benefit from the ongoing investments related to AI.
Taiwan Semi's stock has pulled back from its recent highs, but with a bright future ahead and a dominant market position, it's hard not to like the stock as a long-term investment. Despite its gains this year, Taiwan Semi may still be a good buy right now.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
Taiwan Semiconductor Stock Hits a New All-Time: Is it Too Late to Invest? was originally published by The Motley Fool
