10 Best Semiconductor Stocks to Buy for the AI Boom

2. Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM)

Number of Hedge Fund Holders: 158

Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is the world’s largest dedicated chip foundry, commanding over 60% of the market. Founded in 1987, TSMC leverages its scale and advanced technology to maintain strong operating margins in the competitive foundry space. The shift toward the fabless business model has further boosted TSMC, as major customers like Apple, AMD, and Nvidia rely on its cutting-edge process technologies to manufacture their semiconductor designs.

The company experienced an explosive 2024, with its shares up 109% in the last year. TSM remains integral to the AI revolution, leveraging its cutting-edge 3nm and 5nm technologies to drive innovation for key clients, including Nvidia and Apple. In Q4, High-Performance Computing (HPC), encompassing AI and 5G applications, represented 53% of TSM’s revenue, up from 43% the prior year, fueled by rising AI-driven demand. CEO C.C. Wei expressed confidence in managing geopolitical challenges, such as US export controls on AI chips, highlighting the company’s commitment to maintaining open communication with current and future administrations.

Despite geopolitical risks, TSM continues to invest in advanced manufacturing, which contributed 74% of wafer revenue in Q4. With plans to scale 3nm production and prepare for its 2nm technology, the company is positioned to preserve its competitive edge. These advancements are essential for sustaining margins and meeting the demands of AI applications, including Nvidia’s GPUs and Apple’s custom processors.