We recently compiled a list of the 13 Best Big Tech Stocks To Buy Now. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (TSM) stands against the other big tech stocks.

The State of Big Tech Right Now

Big tech has long been an immensely popular area to invest in when it comes to US stocks, and for good reason. Tech stocks, particularly those investing in AI and offering AI products, have been generating immense returns in 2024, with the second week of September bearing witness to their immense potential. This week, the S&P 500 and the Nasdaq Composite posted their best returns for the entire year, and many tech stocks were part of the faction that made this possible. As a result, there’s a huge rise in the popularity of AI and tech stocks. This is in stark contrast to market opinions on AI stocks, particularly during the first week of September, when many were very concerned that we are in an AI hypecycle that is bound to wind down soon.

Altimeter Capital’s CEO, Brad Gerstner, recently joined CNBC’s “Closing Bell” to discuss trends shaping big tech right now. He noted that the pace of  AI at present is faster than any other tech development seen before. He also added that many investors are starting to lean back into big tech ahead of the election. This development may be coming about because of the historical trend that suggests that stocks perform better in the months directly following a US election – in which case, it makes sense for investors to be piling into big tech and AI right now since that’s a sure shot way to profit in the next few months.

How Is Big Tech Impacting Other Sectors?

A recent notable trend that people have begun to see because of the rise of big tech companies and the growing use of AI is a greater demand for power. Many major tech companies are beginning to require more energy, with the AWS-owner going as far as buying a nuclear-powered data center for $650 million recently.

The primary driving force for this rising demand is the need to develop AI. Many energy-conscious investors may see this new trend as a red flag for big tech. However, Jensen Huang has noted that while AI takes a ton of energy to train, once developed and trained, it will also help save energy. He particularly noted that AI is going to become so advanced through this development that it will eventually end up offering solutions that can change the way we use energy, making our operations endlessly more energy efficient.

With this in mind, big tech seems to be quite an interesting space to follow right now, especially in the days leading up to the US Presidential Elections. As such, we’ve compiled a list of the best big tech stocks to buy right now.

Our Methodology 

For our list below, we selected big-tech stocks with the highest numbers of hedge funds holding stakes in them during the second quarter and then ranked them based on this metric in ascending order.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)

Number of Hedge Fund Holders: 156

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a semiconductor company based in Taiwan. It offers integrated circuits and other semiconductor devices.

The reason why Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is such a popular semiconductor stock pick is its position as a contract manufacturer of chips. Because of this position, the company is a partner to several notable semiconductor players, like Nvidia and Advanced Micro Devices. As a result, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is benefitting from the AI market boom that is propelling these companies to provide more chips in the US and internationally.

A customer for Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is Apple. This tech giant makes up about a quarter of Taiwan Semiconductor Manufacturing Company Limited’s (NYSE:TSM) sales in a year. With Apple investing in artificial intelligence now with the release of Apple Intelligence, TSMC may also begin to see its smartphone business pick up – this is a major tailwind for the stock.

Another tailwind propelling Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) to greater heights is its expected launch of a new chip design in 2025. This is the nanometer chip, which is a next-generation technology that is expected to overtake the market upon its release – particularly because of the energy efficiency the new design is introducing.

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was seen in the portfolios of 156 hedge funds in the second quarter, with a total stake value of $21.3 billion.

Ave Maria mentioned Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its second-quarter 2024 investor letter:

“Top contributors to performance included SharkNinja, Inc. and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM). Taiwan Semiconductor Manufacturing Company Limited is the global leader in semiconductor foundry services, with a dominant market share position in advanced semiconductors. The company has significant pricing power and stands to benefit from secular “megatrends” (5G, high performance computing, AI, rising silicon content per device, etc.) due to its technological leadership.”

Overall TSM ranks 7th on our list of the best big tech stocks to buy. While we acknowledge the potential of TSM as an investment, we believe that AI stocks hold promise for delivering high returns and doing so within a shorter timeframe. 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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Disclosure: None. This article is originally published at Insider Monkey.