1. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
5-Year Revenue Growth: ~22.02%
Number of Billionaire Investors: 30
Number of Hedge Funds: 186
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is engaged in manufacturing, packaging, testing, and selling integrated circuits and other semiconductor devices. The company’s dominant position in the semiconductor industry is primarily due to its technological leadership. It has consistently been a frontrunner at developing and implementing advanced manufacturing processes, enabling it to maintain a competitive edge. AI has emerged as a critical growth driver for Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), with healthy performance anticipated to continue into 2025. Overall, the elevated demand for AI-related chips resulted in a surge in orders for the company’s most advanced manufacturing processes.
The growth in the AI industry had a favorable impact on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s other business segments. The demand for high-performance computing chips, which are used in data centers and AI applications, continues to grow significantly, further cementing its market position. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s business in Q4 2024 was aided by healthy demand for its industry-leading 3nm and 5nm technologies. Sands Capital, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) third-quarter 2024 results and guidance showcased strong continued demand for artificial intelligence (AI) chips. Revenue increased by 29 percent, and earnings saw a 54 percent rise year-over-year. Gross margins were at their highest since 2022, bolstered by price hikes and record utilization at both the 3 nanometer (nm) and 5nm nodes. TSMC’s full-year revenue outlook was revised upward from 25 percent to 30 percent growth. The company also anticipates higher capital expenditure in 2025, a leading indicator for revenue.
Meanwhile, TSMC’s competitive position within the leading-edge chip fabrication industry has improved. The company noted that demand for its next-generation 2nm (N2) node is considerably higher than for its predecessor, N3. Additionally, TSMC has more capacity for N2 than N3. This situation contrasts with Intel and Samsung, which both recently disclosed struggles in ramping up their leading-edge nodes. Together, Intel and Samsung account for approximately $25 billion of foundry revenue, which could potentially migrate to TSMC over time…” (Click here to read the full text)
While we acknowledge the potential of TSM as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for a deeply undervalued AI stock that is more promising than TSM but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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