Why TSMC Remains a Top Semiconductor Company Despite Record Valuations

The foundry market’s undisputed leader

Taiwan Semiconductor Manufacturing, commonly known as TSMC, commands an extraordinary position in the global chip manufacturing landscape. As the world’s preeminent semiconductor foundry, TSMC doesn’t design chips—instead, it manufactures them for industry giants including Nvidia, AMD, Apple, Intel, and Qualcomm. This foundry model has proven extraordinarily profitable and defensible.

The numbers speak volumes about TSMC’s market dominance. In the second quarter of 2025, TSMC captured 70% of the global foundry market, a slight uptick from 67% in the first quarter. Its nearest competitor, Samsung Electronics, holds just 7% market share. This massive gap underscores TSMC’s technological moat and the stickiness of its customer relationships.

Valuation remains more reasonable than alternatives

While semiconductor stocks have surged alongside artificial intelligence enthusiasm, TSMC offers a relatively measured entry point compared to its peers. The top semiconductor company is currently trading at approximately 28 times forward earnings. For context, Nvidia—a key customer and industry bellwether—commands around 40 times forward earnings.

This valuation differential matters significantly for investors seeking exposure to semiconductor sector growth without paying peak prices. TSMC’s position as the essential infrastructure provider for chip design companies gives it structural advantages that justify serious consideration, even as valuations across the sector have climbed toward historical peaks.

Understanding the risks

Despite its market leadership, investors should recognize that geopolitical considerations, particularly Taiwan’s political status, create uncertainty around TSMC’s long-term operational stability. Additionally, the semiconductor industry remains cyclical, and current AI-driven demand may not sustain indefinitely.

The broader point: TSMC’s dominant market position, diversified customer base spanning multiple technology segments, and more attractive valuation relative to competitors position it as a significant player in semiconductor exposure. However, like all equity investments, it requires careful consideration of individual risk tolerance and portfolio objectives.