We recently published a list of 10 Best Major Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against other best major stocks to buy according to hedge funds.
After a notable growth of 25% for the broader market in 2024, the S&P 500 index gained a little under 4% in the first month of 2025. The stock market had a mixed start to 2025 after the U.S. tech companies took a massive hit from the launch of Deepseek’s R1 AI model. Despite a major blow, the tech-heavy NASDAQ 100 index has gained over 4.50% year-to-date.
READ ALSO: 10 Large-Cap Stocks Insiders Are Selling Recently
Inflation and Tariff Concerns
U.S. stocks fell on February 12 following the release of January inflation data. The consumer-price index (CPI) soared 3% in January from a year ago, exceeding economists’ estimates. The data has somewhat stoked investors’ concerns about price pressures and the worry that interest rates might not come down as expected.
January CPI usually indicates big price adjustments made by businesses at the start of the year. Moreover, the beginning of a new administration has an impact on businesses. According to Goldman Sachs Research’s chief US equity strategist David Kostin, every five-percentage-point increase in the US tariff rate is estimated to reduce S&P 500 EPS by roughly 1-2%.
Therefore, if the U.S. administration sustains the proposed tariff rates, a 25% tariff on imported goods from Mexico and Canada and an additional 10% tariff on imports from China would reduce S&P 500 EPS forecasts by nearly 2-3%, as per Goldman’s Research.
However, the tariff policy doesn’t slow down the AI investment by the U.S. tech giants as they continue to expand their AI-related services and products. Four out of the Big Five companies are projected to invest over $300 billion in 2025 building data centers to fuel the AI boom.
Our Methodology
We have listed the top 10 best major stocks based on hedge fund sentiment, according to Insider Monkey’s database. The best major stocks are ranked in ascending order of the number of hedge fund holders, as of Q3 2024.
Why do we care about what hedge funds do? 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)
No. of Hedge Fund Holders: 158
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a Taiwanese company that designs and manufactures semiconductors. The company manufactures products for various applications that target a wide range of end markets including high-performance computing, smartphones, the Internet of Things (IoT), automotive, and digital consumer electronics. TSM holds a major share in contract chip manufacturing and advanced chip manufacturing.
On January 17, Barclays analyst Simon Coles upgraded the price target on TSM shares from $240 to $255 and gave the company an Overweight rating. The analyst kept the rating following the company’s strong Q4 2024 results. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) solidified its position as the leading semiconductor manufacturer, with strong demand for advanced process nodes driving revenue growth. TSMC’s Q4 revenue soared by 37% year-over-year to $26.88 billion, driven by increased sales of 3nm and 5nm technologies. The company’s gross margin for Q4 was 59%, fueled by higher capacity utilization and productivity gains. In addition to that, the company maintains its dominance in cutting-edge semiconductor technology, with its advanced technologies accounting for 74% of wafer revenue in Q4.
Wedgewood Partners, an investment management company, discussed Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q4 2024 investor letter and said:
“Taiwan Semiconductor Manufacturing was another top contributor to performance during the quarter and for the year. The Company’s earnings growth dramatically accelerated compared to last year as the Company’s wafer fabrication and packaging volumes soared in 2024. In addition, the Company’s customer prices rebounded in the face of more normalized capital expenditures. The Company maintains a near-monopoly in the fabrication of nearly every new AI accelerator brought to market over the past two years. They continue investing tens of billions in building and 7ill future capacity with orders for what seems to be insatiable hyperscale demand for accelerated computing. The stock ended the year trading at a consensus forward earnings multiple that is several points lower than large-cap growth benchmarks, despite the Company’s dominant position in the most important industry that is driving one of the largest technological shifts in a generation.”
Overall, TSM ranks 8th on our list of best major stocks to buy according to hedge funds. While we acknowledge the potential of TSM to grow, 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.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
