We recently compiled a list of the 11 Trending AI News and Ratings. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against the other trending AI stocks.
AI continues to be a transformative force, which is driving advancements across industries through improved infrastructure, data analytics, and automation. Its adoption is reshaping almost every sector in the market, including manufacturing, cloud computing, and robotics. Even though some challenges can be in scaling applications and managing demand, the long-term potential for AI to revolutionize industries and create new growth opportunities seems undeniable.
Investing in Long-Term Trends and AI Potential
In a Bloomberg interview, Lei Qiu, CIO for Thematic Innovation Equities at AllianceBernstein, discussed her team’s approach to identifying major long-term trends that drive equity growth beyond economic cycles. The firm focuses on significant themes, such as AI, which dominated 2023 and 2024. In addition to enabling AI infrastructure, they are closely monitoring the adoption of AI applications, including advancements in data analytics, cloud migration, networking, and communication equipment, which are significant for connecting smaller, more power-efficient data centers.
Qiu highlighted how automation and AI are already improving efficiency in industries like manufacturing, where companies are realizing substantial cost savings. She also mentioned the potential for related areas such as robotics, autonomous systems, and the Internet of Things to grow in 2025.
On the topic of M&A, Qiu acknowledged its potential resurgence, supported by favorable regulatory environments and strong company balance sheets. However, as an investor, she mentioned the challenge of predicting specific transactions. She also stressed the importance of stock selection and noted that not all ideas succeed without the right management, product, and execution.
Regarding macroeconomic influences, Qiu explained that while dramatic shifts, such as the sharp rate hikes in 2022, can impact long-duration assets, her team prioritizes fundamentals and long-term trends over short-term market timing. She concluded that secular growth themes remain central to the firm’s investment strategy.
For this article, we selected AI stocks by reviewing news articles, stock analysis, and press releases. We listed the stocks in ascending order of their hedge fund sentiment taken from Insider Monkey’s database of 900 hedge funds.
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).
A close-up of a complex network of integrated circuits used in logic semiconductors.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 158
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) produces a wide range of semiconductor devices, including AI-enabled solutions for high-performance computing, smartphones, automotive, and IoT applications globally.
Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) exceeded revenue expectations for the October-December quarter, reporting a 39% increase to NT$868.5 billion (NT$1 = US$0.030), due to strong demand for AI hardware. TSMC’s revenue growth for 2024 reached 34%, surpassing its 30% target, as the company benefits from the global AI race, Bloomberg reported.
However, some investors are concerned about over-building and a lack of a major AI-driven application. TSMC’s reliance on Apple and its geopolitical challenges in 2025 may also impact its performance. Key areas to watch include the company’s advanced packaging capacity, US fab progress, and capital-spending plans for next year, the report stated. Bloomberg Intelligence Technology Industry analyst, Charles Shum said:
“The company’s gross margin is likely to expand to a two-year high of 58%, or more. On the upcoming earnings call, four areas merit attention: First, the outlook for CoWoS advanced-packaging capacity build and revenue, which is likely to give insight into the expected strength for AI chip demand in the coming 12-18 months. Second, progress on the US Arizona fab’s ramp-up, which is critical to meeting the onshoring chipmaking needs of Apple, Nvidia and others. Third, potential margin pressure from weaker demand in 7-, 16-nm and larger mature nodes.
Finally, capital-spending plans for 2025, which will signal TSMC’s confidence in the uptake of its next-generation N2 node.”
Overall TSM ranks 4th on our list of the trending AI stocks. 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 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.