TSMC Logo [Reuters=Yonhap News]

Amid an unprecedented surge in performance for memory semiconductor companies like Samsung Electronics due to the artificial intelligence (AI) boom, Taiwan's TSMC, the world's No. 1 foundry (semiconductor contract manufacturing), is garnering attention as a key driver of future growth, the Wall Street Journal (WSJ) reported on the 11th (local time).

The WSJ emphasized, "While TSMC does not produce memory chips, it is an indispensable manufacturer in virtually all other sectors, including Nvidia's AI chips and Apple's smartphone chips."

According to the WSJ, TSMC's greatest strength is its well-managed growth potential. As the speed of revenue growth outpaces the speed of cost increases, its gross profit margin is rising.

This creates a virtuous cycle where the burden of fixed costs is offset as the factories operate close to "full capacity." The company's gross profit margin rose from 59% a year ago to 66% in the first quarter of this year.

Compared to other big tech companies grappling with the AI bubble issue, TSMC's situation is much more favorable.

Although TSMC announced that its capital expenditures (CAPEX) this year will be at the higher end of the initially projected range of $52 billion to $56 billion, the market sees little of this as overexpansion.

Wei Zhejia (C.C. Wei), chairman of TSMC, expressed confidence that revenue growth this year will exceed 30%, sufficiently outstripping the increase in investment.

The WSJ noted that the revenue growth emphasized by the company is solidifying as a given trend. This is because, amidst the competition for AI equipment, customers are actively securing semiconductor volumes, even paying billions of dollars in advance payments.

Pedestrian walks past TSMC logo [EPA=Yonhap News]

For example, Nvidia had purchase commitments exceeding $95 billion (141 trillion won) in its fiscal fourth quarter (November to January), a significant portion of which reflects payments to TSMC. Nvidia's purchase commitment has grown nearly sixfold compared to $16 billion two years ago.

Another of TSMC's attractions is its market dominance, where it virtually has no competitors. While Samsung Electronics is the second-largest foundry in the world, the revenue gap with TSMC is substantial, and Intel and Japan's Rapidus are struggling to establish themselves in the market.

Recently, Tesla CEO Elon Musk launched the 'Terafab' project in collaboration with Intel to counter TSMC, but it is expected to take a long time for actual results to emerge.

Despite these advantages, the WSJ reported that TSMC's stock price is undervalued. The company's 12-month forward price-to-earnings ratio is around 21 times, well below the Philadelphia Semiconductor Index's average of 26 times.

TSMC's stock price has risen 44% since the beginning of the year. This is significantly lower compared to the 112.5% and 174.2% increases in the stock prices of Samsung Electronics and SK Hynix, respectively, during the same period.

According to the Korea Securities Depository, as of the 8th, Korean investors held $1.61 billion (approximately 2.4 trillion won) worth of TSMC ADRs listed on U.S. stock exchanges, ranking 26th among U.S. stocks.