Demand for Chips Shows No Signs of Slowing. Is Taiwan Semiconductor Too Expensive Now?

Key Points TSMC's market cap is now above $2 trillion. The chip foundry giant is forming a joint venture with Sony to produce next-generation image sensors. 10 stocks we like better than Taiwan Semiconductor Manufacturing › The artificial intelligence (AI) chip craze can't be discussed without including the behemoth Taiwan Semiconductor Manufacturing Company (NYSE: TSM) . The third-party chip manufacturer has been one of the standout stocks of the past year, up nearly 80%. That substantial rise has pushed the company's valuation past $2 trillion, but investors are starting to question how long the chip boom will last. Is TSMC too expensive now? TSMC's growth has been impressive. In the second quarter, its revenue jumped 36% year over year, while net income and diluted earnings per share rose 77.4%. The company's strong free cash flow has given it an enviable balance sheet, and its dividend payouts have more than doubled in the past three years. Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » Chip demand isn't slowing, and TSMC is also pursuing new opportunities. For example, it's in the process of setting up a joint venture with Sony (NYSE: SONY) to produce next-generation image sensors. That multibillion-dollar collaboration will supply high-performance camera sensors for iPhones and future physical-AI use cases. The duo is targeting mass production by 2029. Image source: The Motley Fool. The stock isn't cheap, but its valuation metrics are still quite reasonable. The company's forward P/E ratio is just 25, while the trailing P/E ratio is 36. TSMC's five-year PEG ratio is almost exactly 1, implying the stock is fairly priced. Given the new partnership with Sony and the expectation for continued high chip demand through the second half of this decade, TSMC may not be a bargain, but it is still surely worth buying and holding. No, Taiwan Semiconductor is not too expensive for investors looking to hold it for the long haul. Should you buy stock in Taiwan Semiconductor Manufacturing right now? Before you buy stock in Taiwan Semiconductor Manufacturing, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $421,943 !* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,382,819 !* Now, it’s worth noting Stock Advisor’s total average return is 983 % — a market-crushing outperformance compared to 216% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor , and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 15, 2026. Catie Hogan 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 .

The chip foundry giant is forming a joint venture with Sony to produce next-generation image sensors.

The artificial intelligence (AI) chip craze can't be discussed without including the behemoth Taiwan Semiconductor Manufacturing Company (NYSE: TSM) . The third-party chip manufacturer has been one of the standout stocks of the past year, up nearly 80%. That substantial rise has pushed the company's valuation past $2 trillion, but investors are starting to question how long the chip boom will last. Is TSMC too expensive now?

TSMC's growth has been impressive. In the second quarter, its revenue jumped 36% year over year, while net income and diluted earnings per share rose 77.4%. The company's strong free cash flow has given it an enviable balance sheet, and its dividend payouts have more than doubled in the past three years.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

Chip demand isn't slowing, and TSMC is also pursuing new opportunities. For example, it's in the process of setting up a joint venture with Sony (NYSE: SONY) to produce next-generation image sensors. That multibillion-dollar collaboration will supply high-performance camera sensors for iPhones and future physical-AI use cases. The duo is targeting mass production by 2029.

The stock isn't cheap, but its valuation metrics are still quite reasonable. The company's forward P/E ratio is just 25, while the trailing P/E ratio is 36. TSMC's five-year PEG ratio is almost exactly 1, implying the stock is fairly priced.

Given the new partnership with Sony and the expectation for continued high chip demand through the second half of this decade, TSMC may not be a bargain, but it is still surely worth buying and holding. No, Taiwan Semiconductor is not too expensive for investors looking to hold it for the long haul.