Taiwan Semiconductor's Grip on AI Chip Market Gets Tighter — Here's Why It Matters

When One Company Controls 70% of the Game

Taiwan Semiconductor Manufacturing (TSMC) isn’t just another chipmaker — it’s basically the infrastructure that powers the entire AI boom. With a 70% market share in chip manufacturing according to TrendForce, the company has become the ultimate chokepoint for every major tech player. Apple, Nvidia, Qualcomm, AMD, and Broadcom all depend on TSMC’s fabs to turn their designs into actual silicon.

That’s not accidental dominance. It’s structural. TSMC invests billions into cutting-edge manufacturing capabilities that competitors simply can’t match at scale. Which brings us to the real question: why is this relevant to investors right now?

The Numbers Tell a Growth Story

Here’s where it gets interesting. The AI chip market alone is projected to expand at 29% annually through 2030, reaching roughly $323 billion in size. But zoom out to the entire semiconductor industry, and Statista estimates growth to nearly $1.3 trillion by 2030 — up from the current $789 billion market.

TSMC’s financials reflect this tailwind. In the first nine months of 2025, the company pulled in almost $89 billion in revenue, representing a 36% jump from the same period in 2024. That’s not slow-and-steady growth; that’s acceleration driven by client demand from Nvidia, AMD, and other chip designers riding the AI wave.

Cost management has stayed reasonable too — revenue of goods increased 24% over the same timeframe, suggesting TSMC isn’t getting crushed by scaling up production. However, comprehensive income only grew 30%, lagging behind revenue growth, which hints at pressure from forex losses and other headwinds.

Valuation: Cheaper Than You’d Expect

Here’s what might surprise you: despite a 50%+ stock surge over the past year, TSMC’s valuation isn’t outrageous. The stock trades at a P/E ratio of 29, above its five-year average of 25, but consider the context.

Most of TSMC’s major clients — Apple, Nvidia, Broadcom — trade at much higher multiples. TSMC’s discount likely reflects legitimate geopolitical risk: the company builds most chips in Taiwan, a geopolitical flashpoint that even Warren Buffett cited when Berkshire Hathaway unwound its position.

But here’s the counterargument: China’s massive demand for TSMC chips creates a strategic incentive to maintain supply chain stability. All parties — from tech giants to geopolitical actors — have skin in the game to keep TSMC functioning.

The Real Play

The secular trend is simple: more AI demand = more advanced chips = more dependence on TSMC’s manufacturing prowess. TSMC is currently the only player capable of producing the most advanced chips at the scale the market requires. That’s not a temporary advantage — it’s a moat.

Whether geopolitical risks eventually materialize or remain distant concerns, the immediate outlook is shaped by continued AI growth and TSMC’s unmatched production capabilities. That combination has already driven significant returns, and given the addressable market expansion ahead, the stock’s current valuation still looks reasonable relative to the opportunity.