The market took a break from its recent rally last week after Federal Reserve Chairman Jerome Powell made some pessimistic remarks about the economy.
He did lower rates by a quarter of a percent, and he's planning to make two more cuts, in October and December. However, it's not because inflation has been tamed; rather, unemployment is rising, and the hope is that an expanding economy will produce more jobs without leading to higher inflation.
While the market's rise takes a little break, consider buying Taiwan Semiconductor Manufacturing (TSM -0.12%) stock. Here's why.
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A major part of the AI revolution
Taiwan Semi is a chip foundry, so it does a lot more than artificial intelligence (AI). Before AI became the revolutionary technology that it is today, the company had an excellent business manufacturing the chips designed by its clients to power technology like gaming and autonomous vehicles, and these and other categories are still an integral part of its business.
But it plays in important role in the AI process. As companies like Amazon and Microsoft need ever-growing amounts of power, and companies like Nvidia and Advanced Micro Devices have increasing demand for their chips, they rely on Taiwan Semiconductor to produce them.
Taiwan Semiconductor stock is up 38% year to date, and it dipped last week along with the broader market. It trades at the reasonable valuation of 24 times forward 1-year earnings, and it's a great entry point into a growth stock that has years of opportunity ahead.
