Artificial intelligence (AI) is expected to add $40 trillion in operating efficiencies to the global economy over the long term, according to research from Morgan Stanley. One of the best stocks to profit from this incredible opportunity is Taiwan Semiconductor Manufacturing Co. (TSM +0.74%), which is making the chips powering this tech revolution.
The stock has soared 354% over the past three years and still offers attractive value that can help investors outperform the broader market.
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Why buy Taiwan Semiconductor stock
TSMC specializes in developing the most advanced chip technologies for use in data centers, as well as in phones and other devices. Companies like Nvidia and Advanced Micro Devices don't build their own chips. They design them and rely on TSMC for manufacturing. TSMC's expertise means it can price its services for robust profitability. Over the last year, it generated a stellar net profit margin of 44%, meaning it's converting nearly half of its revenue into profits.
NYSE: TSM
Key Data Points
Demand for high-performance chips used for AI drove 57% of TSMC's sales in the third quarter, and this contribution is likely to continue increasing. Management expects AI chip demand to remain robust over the next five years. Analysts are currently forecasting TSMC's revenue and earnings to grow at an annualized rate of 17% through 2029. This should deliver a comparable return for investors, as the stock trades at a reasonable forward earnings multiple of 24 on 2026 estimates.
