Is Taiwan Semiconductor the Best AI Stock to Buy Now? | The Motley Fool
When ranking the best artificial intelligence (AI) stocks to buy, Taiwan Semiconductor (TSM +2.75%) should make the list. Few companies are universally expected to benefit from AI as much as TSMC is, which vaults it to the top of the best AI stocks to buy right now.
So, why is TSMC among the best players to invest in within the chip sector? Its scale is unmatched.
Image source: Taiwan Semiconductor Manufacturing.
There are no replacements for Taiwan Semiconductor
Taiwan Semiconductor is a chip foundry, which means it takes chip designs from its clients and produces them. TSMC’s customers range from Nvidia to AMD to Apple and just about every company in between.
Taiwan Semiconductor has always had leading technology, but what really sets it apart from other foundries is its sheer size. So, even if one of these clients wanted to switch to a different foundry, they would only be able to do it in increments or not at all, because there’s just no other company on Earth that has the production capabilities that TSMC has. This locks it into a fairly sizable market share and positions it well to capitalize on the massive surge in chip demand for AI computing.
Taiwan Semiconductor Manufacturing
Today’s Change
(2.75%) $13.02
Current Price
$485.80
Key Data Points
Market Cap
Day’s Range
$476.40 – $487.47
52wk Range
$266.82 – $487.47
Volume
10.9M
Avg Vol
11.5M
Gross Margin
63.08%
Dividend Yield
0.78%
Another factor, as mentioned earlier, is that TSMC supplies chips to Nvidia and AMD. These two companies compete for data center market share, and they aren’t the only firms TSMC makes chips for in the AI computing realm. There are countless cases of TSMC making chips for competitors, and that just shows the universality of TSMC as an AI and tech investment.
TSMC is clearly a winner from this standpoint, but how is it doing as an investment? During its latest quarters, TSMC’s revenue and profits have risen at a pretty respectable pace.
TSM Revenue (Quarterly YoY Growth) data by YCharts
However, if you follow other AI firms (like Nvidia or AMD), you also know that these growth rates are a lot slower than what those two are experiencing. So, I think this makes TSMC a good AI stock to own, not a great one.
The reality is, other AI stocks offer far more upside than Taiwan Semiconductor. It just isn’t growing fast enough to compare to some of its clients. However, if you’re looking for a company that will still produce market-crushing returns and will be nearly guaranteed to do so, then it could be a fantastic investment for you.
Keithen Drury has positions in Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
