12 Best Tech Stocks to Buy For Long-Term Investment

6. Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM)

Number of Hedge Fund Holders: 186

Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM) is a tech company that manufactures, packages, tests, and sells integrated circuits and other semiconductor devices globally. It provides various wafer fabrication processes. It also offers customer & engineering support services, invests in tech start-up companies, and provides investment services. Its products are used in HPC, smartphones, IoT, automotive, and digital consumer electronics.

The company’s HPC segment made up 51% of its total revenue in 2024 after showcasing a 58% year-over-year revenue increase which was driven by AI-related applications. Revenue from AI accelerators contributed mid-teens percentage to this total revenue for the year. These accelerators include AI GPUs, AI ASICs, and HBM controllers. The company is investing in advanced process technologies, such as 3-nanometer and 2-nanometer, which are needed to develop high-performance AI chips. It’s also developing A16 technology with Super Power Rail (SPR) for specialized HPC products.

Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM) forecasts that revenue growth from AI accelerators will reach a mid-40% CAGR for five years starting from 2024. The company’s capital expenditures for 2025 are expected to be between $38 and $42 billion. On March 4, TD Cowen’s Krish Sankar reiterated a Hold rating on the company with a $215 target. Sankar views the company’s recent $100 billion US investment as low-risk but at the same time acknowledges the timeline uncertainty.

Seeing the potential in its AI chip demand, Sands Capital Technology Innovators Fund stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q4 2024 investor letter:

“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)