TSMC maintains dominant position in AI chip manufacturing with 70.4% market share, while net income and operating income have risen 206% and 216% respectively over the past three years.

TSMC holds 70.4% market share in semiconductor manufacturing, with Samsung Electronics as the next-closest competitor at 7.1%. TSMC manufactures virtually all advanced AI chips.

TSMC's competitive advantage stems from its manufacturing ability at scale and precision — capabilities that cannot be duplicated quickly. In Q1, 74% of TSMC's revenue came from advanced chips (7-nanometer or smaller), with a quarter of revenue from 3nm chips. The company's 2nm chip family is ramping up production.

Major chip customers including Nvidia, Broadcom, Alphabet, and Amazon must use TSMC for manufacturing, as switching would risk lower yields and reduced performance. TSMC has used this position to increase prices and improve profits and margins.

As of June 3, the stock traded at 36.6 times earnings — its most expensive valuation since 2021.