1. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 186
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a Taiwan-based global leader in semiconductor manufacturing. It operates as a pure-play foundry, producing integrated circuits for a wide range of customers, including major fabless chip designers. TSM manufactures chips used in smartphones, high-performance computing, automotive electronics, and IoT devices, with advanced process technologies down to 3nm. The company does not design its own chips but focuses exclusively on fabrication, offering services from design support to backend packaging. TSM’s production facilities are primarily in Taiwan, with expansion underway in the US and Japan to support global demand and supply chain diversification.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) reported strong financial performance in the latest Q4 2024, with revenue increasing 14.3% sequentially, supported by robust demand for 3-nanometer and 5-nanometer technologies. For the full year 2024, TSM’s revenue increased 30% in USD terms to $90 billion, outperforming the foundry industry growth. Looking ahead to 2025, management expects another strong growth year with revenue forecasted to increase by close to mid-20s percent in USD. AI-related demand remains particularly robust, with revenue from AI accelerators expected to double in 2025 after more than tripling in 2024.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) announced significant expansion plans, with the capital budget set between $38 billion and $42 billion for 2025, focusing on advanced process technologies, specialty technologies, and advanced packaging. In terms of global manufacturing, TSM’s first fab in Arizona has entered high-volume production in Q4 2024 using N4 process technology, achieving yields comparable to Taiwan fabs. The company is also progressing with expansion plans in Japan and Germany, with the first specialty technology fab in Kumamoto starting volume production at the end of 2024. With regard to technological advancement, TSM’s 2-nanometer technology is on track for volume production in the second half of 2025, while A16 technology featuring Super Power Rail is scheduled for volume production in the second half of 2026. Despite the higher costs associated with overseas operations, which are expected to impact gross margins by 2-3%, TSM maintains its long-term gross margin target of 53% and higher.
Overall, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) ranks first on our list of the 12 best ADR stocks to buy according to hedge funds. While we acknowledge the potential of TSM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TSM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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