As traders study every tariff-related tweet from President Trump, the artificial intelligence (AI) revolution is quietly progressing in the background. AI tools are changing how users search, research, and code, while firms are embedding AI into everyday workflows. To capitalise on this powerful trend, I think a stock to consider buying today is Taiwan Semiconductor Manufacturing Co. (NYSE: TSM).
TSMC, as the company is known, is the world’s leading pureplay semiconductor foundry, which means it builds chips for others and not itself. Its list of customers is a who’s who of the tech world — Apple, Nvidia, AMD, Qualcomm, Google, and even Tesla all rely heavily on TSMC to manufacture their most advanced chips.
This means the company controls a substantial majority of global AI chip manufacturing.
Incredible growth
We saw this competitive strength on show in the first quarter. Revenue jumped 41.6% — ignoring currency moves — to $25.5bn, as demand for AI-related chips easily offset weakness in other areas (smartphone, for example). Net profit surged 60.3% to just over $11bn, representing an incredible 43% net margin.
For the full year, management expects revenue to grow in the mid-20% range. Looking further out to 2029, TSMC sees its revenue compound annual growth rate approaching 20%. For an already large firm, that’s very impressive growth.
However, one uncertainty here is global trade tensions, which might lead to a slowdown in demand. The company says it sees no evidence of this so far, but it’s a potential issue moving forward.
Another risk often highlighted with the stock is the potential for China to suddenly invade Taiwan. Again, this can’t be ruled out, though I imagine most portfolios would take a smashing if something as serious as this happened. Let’s hope it doesn’t.
To diversify its global footprint, TSMC is spending $165bn to set up US manufacturing to “power the future of AI“. It has also opened a new fab in Japan and is building one in Germany. This reduces the risk of having all chip production on the island of Taiwan.
Growth a reasonable price
Now, it’s worth mentioning that the US-listed shares of TSMC are unfortunately not eligible to be held in a Stocks and Shares ISA. But they can be bought in a general trading account or Self-Invested Personal Pension (I own some in my SIPP).
The share price is down 13% since January. And at $195, the shares are trading at 20 times forward earnings, which I think is a very reasonable valuation for a world-class company still growing strongly.
Upgrade cycle
To stay ahead of the curve, TSMC is set to begin production of its cutting-edge 2nm and 1.6nm process technologies in late 2025 and 2026, respectively. These will produce faster and more energy-efficient chips, and could trigger a fresh upgrade cycle across the tech industry.
Looking ahead, I expect TSMC to stay at the centre of many powerful technology trends. From AI data centres and VR headsets to electric vehicles and driverless taxis, they all need tons of advanced chips.
I think the stock represents high-quality growth at a very reasonable price and is worth considering.
