Nvidia has proven to be an exceptional investment over the past decade, as the company’s shares have soared 32,600% during that time and surpassed the 207% gains recorded by the S&P500 hint.

So an investment of just $3,500 made in Nvidia stock ten years ago is now worth just over $1 million.

NVDA data by Y charts.

So Nvidia has proven itself to be a millionaire stock over the last 10 years, assuming someone invested $3,500 in its stock at that time and never sold it. However, as the chart above shows, the majority of Nvidia’s gains have come in the last two years, when the artificial intelligence (AI) the craze has taken hold of the world.

Nvidia has been at the forefront of the AI ​​revolution with its graphics processing units (GPUs), which have been instrumental in training AI models and are now deployed for AI Inference. The good part is that Nvidia can continue to grow at a healthy pace in the future also thanks to the lucrative opportunity present in the AI ​​chip market, a space where it is currently the dominant player.

But at the same time, investors looking to buy Nvidia stock right now will have to pay 65 times earnings and 36 times sales. Although Nvidia could justify this valuation with its breathtaking growth, investors looking for an alternative trading at relatively cheaper levels would do well to take a closer look. Semiconductor manufacturing in Taiwan (TSM 2.78%)popularly known as TSMC.

The Taiwan-based foundry giant plays a vital role in the global semiconductor market and could be an ideal choice for investors looking to build a million dollar wallet. Let’s look at the reasons why.

TSMC is one of the best ways to take advantage of the AI ​​boom

TSMC is the world’s largest semiconductor foundry. Its manufacturing plants are used by major chipmakers such as Nvidia, AMD, Broadcom, Qualcommand many others to make chips. Additionally, the consumer electronics giant Apple is TSMC’s largest customer, while companies like Sony are also turning to the Taiwanese company for the manufacturing of its chips.

Of note, TSMC ended 2023 with an impressive base of 528 customers, manufacturing nearly 12,000 products for multiple end markets, such as smartphones, Internet of Things (IoT), high-performance computing, consumer electronics and automobiles. Given that AI is driving solid growth across all of these end markets, it’s no surprise why TSMC has seen incredible growth lately.

The company released its third-quarter 2024 results on October 17, reporting a 36% year-over-year increase in revenue to $23.5 billion. This exceeds the upper limit of the company’s $23.2 billion forecast. Better yet, TSMC’s net profit soared 54% year over year to $10.1 billion, easily beating the consensus estimate. The company’s stronger profit growth can be attributed to a 4.2 percentage point increase in its net profit margin.

TSMC’s exceptional growth is driven by increasing demand for the company’s advanced chip nodes, which are 7 nanometers (nm) or smaller in size. Specifically, advanced process nodes generated 69% of its total revenue, up from 59% last year. What’s worth noting here is that TSMC’s 3nm node accounted for 20% of its revenue in the previous quarter, compared to just 6% in last year’s quarter.

This can be attributed to the arrival of the latest generation of Apple iPhones, which feature a 3nm processor manufactured by TSMC. Going forward, the company’s 3nm process node is expected to continue to see stronger adoption as next-generation AI chips from Nvidia, AMD, and Intel are expected to be manufactured using this platform.

Additionally, TSMC is pushing the boundaries even further by currently developing its 2nm technology, which is expected to enter production next year. Thus, TSMC will have an additional advanced node to sell to customers, and it will not be surprising to see the 2nm process become another solid growth engine for the company.

This is because chips made using a smaller process node pack more transistors onto a smaller area and have higher computing power and thermal efficiency. As a result, customers use TSMC’s advanced process nodes to manufacture chips capable of delivering superior performance while maintaining low power consumption.

With a market share of nearly 62% in the global semiconductor foundry industry, well ahead of second-place Samsung’s 11%, TSMC is in an exceptional position to capitalize on the secular growth of the semiconductor market at long term. This is precisely why its guidance for the current quarter is also exceptional.

TSMC expects fourth-quarter revenue of $26.5 billion, midway through its guidance range, as well as an operating margin of 47.5%. Its revenue forecast points to a potential increase of 35%, while net income is also expected to grow at an attractive pace given that TSMC’s operating margin stood at 41.6% in the 2018 quarter. previous year.

However, investors looking to build a million-dollar portfolio would do well to also focus on the company’s long-term growth potential.

Why TSMC seems like a good choice for a million dollar portfolio

The global semiconductor market is expected to generate $1.47 trillion in revenue in 2030, up from $729 billion in 2022. Not surprisingly, the global semiconductor foundry market is expected to grow from $122 billion annually last to $276 billion in 2033. We already see that TSMC is the dominant player in this space, but more importantly, the company has recently significantly expanded its addressable market by diversifying beyond the foundry domain .

Under his new Foundry 2.0 economic modelTSMC has ventured into other markets which include “packaging, testing, mass manufacturing and others”. The company points out that this new model has already increased its addressable market from $115 billion to $250 billion. So there is a good chance that TSMC will maintain its impressive growth rates for a long time.

Analysts expect the company to finish 2024 with revenue of $89.3 billion, which would represent a 28% increase from last year. The following chart indicates that TSMC would also be able to maintain impressive growth over the next two years.

TSM Revenue Estimates for the Current Fiscal Year data by Y charts.

However, the chart also shows that analysts have increased their revenue estimates for TSMC, a trend that could continue due to the company’s expanding addressable market and secular growth in the foundry sector over the next decade. That’s why investors would do well to buy this semiconductor stock immediately, as it trades at an attractive price of 35 times current earnings and 25 times current earnings. forecast profitswhich makes it significantly cheaper than Nvidia.

Another thing to note is that TSMC stock has surged more than nine times over the past decade. It could be poised to replicate such performance in the future based on the points discussed above, which is why anyone looking to build a million dollar portfolio should consider buying it before it doesn’t skyrocket.