Taiwan Semiconductor Manufacturing (TSM +6.36%) (TSMC) is the world's largest semiconductor (chip) manufacturer, with a client list containing most of the world's top tech companies. It's been a great year for TSMC stock, up over 49% through Oct. 26.
Even with the stock up that much year to date, and up over 240% in the past five years, it's well positioned to keep climbing through the end of this decade.
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TSMC is one of the most vital companies in the artificial intelligence (AI) pipeline as the go-to manufacturer for advanced AI chips. If you look at all of the hardware in data centers (a critical piece to training AI), you can bet that TSMC manufactured a large portion of the chips.
NYSE: TSM
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In the coming years, AI infrastructure spending is expected to skyrocket, and TSMC will undoubtedly be a major beneficiary. Other semiconductor companies produce AI chips, but TSMC boasts industry-leading manufacturing capabilities, including the world's most technologically advanced foundries. And as data center power consumption continues to increase, the company is actively working to address this issue by pioneering energy-efficient chip architectures.
TSMC's next-generation process will be its 2nm (nanometer) chips, expected to be available in 2026. TSMC predicts these chips will use between 25% to 30% less power than its 3nm architecture at the same performance level. While this alone won't solve the AI industry's energy consumption problem, it will increase TSMC's competitive advantage, especially as hyperscalers look for more efficient ways to scale capacity while controlling energy costs.
