TSMC’s outstanding growth was driven by the growing demand for the company’s advanced  chip nodes, which are 7-nanometer (nm) or smaller in size. More specifically, the advanced-process nodes produced 69% of its total revenue as compared to 59% in the year-ago period. What’s worth noting here is that TSMC’s 3nm node accounted for 20% of its top line in the previous quarter as compared to just 6% in the year-ago quarter.

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

What’s more, TSMC is pushing the envelope further as it is currently developing its 2nm technology, which is expected to go into production next year. So, TSMC will have an additional advanced node to sell to customers, and it won’t be surprising to see the 2nm process becoming another solid-growth driver for the company.

That’s because chips manufactured using a smaller-process node pack more transistors into a smaller surface area and have higher-computing power and thermal efficiency. As a result, customers have been using TSMC’s advanced-process nodes to manufacture chips capable of delivering superior performance while keeping power consumption low.

With a market share of almost 62% in the global-semiconductor foundry space, which is well ahead of second-placed Samsung’s 11%, TSMC is in an outstanding position to capitalize on the secular growth of the semiconductor market in the long run. That’s precisely why its guidance for the current quarter is outstanding as well.

TSMC is expecting $26.5 billion in revenue in Q4 at the midpoint of its guidance range, along with an operating margin of 47.5%. Its top-line forecast points toward a potential increase of 35%, while the bottom line should also increase at a nice clip considering that TSMC’s operating margin stood at 41.6% in the prior-year quarter.

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

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 set to jump from $122 billion last year to $276 billion in 2033. We have already seen that TSMC is the dominant player in this space, but more importantly, the company has significantly expanded its addressable market of late by diversifying beyond the foundry space.

Under its new Foundry 2.0 business model, TSMC has moved into additional markets that include “packaging, testing, mass making, and others.” The company points out that this new model has increased its addressable market from $115 billion to $250 billion already. So, there is a solid chance of TSMC sustaining its impressive growth rates for a long time to come.

Analysts are expecting the company to finish 2024 with $89.3 billion in revenue, which would be a 28% increase from last year. The following chart indicates that TSMC would be able to sustain impressive growth for the next couple of years as well.

TSM Revenue Estimates for Current Fiscal Year data by YCharts.

However, the chart also shows that analysts have been bumping up their revenue estimates for TSMC, a trend that could continue because of the company’s expanded-addressable market and the secular growth of the foundry space over the next decade. That’s why investors would do well to buy this semiconductor stock right away as it is trading at an attractive 35 times trailing earnings and 25 times forward earnings, which makes it significantly cheaper than Nvidia.

Another thing worth noting is that TSMC stock has jumped over nine times in the past decade. It may get close to replicating such a performance in the future based on the points discussed above, which is why anyone looking to make a million-dollar portfolio should consider buying it before it soars higher.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

Should You Buy This Millionaire-Maker Stock Instead of Nvidia? was originally published by The Motley Fool