As we approach 2026, investors need to start thinking about what the biggest investing trends will be. I think that nothing has changed over the past three years and that artificial intelligence (AI) investing will still be the dominant theme, even though it started in 2023.
The reality is the AI buildout is far from over, and AI hyperscalers are planning to spend hundreds of billions of dollars on AI computing infrastructure in 2026, breaking records they just set in 2025. Several companies benefit from these massive capital expenditures, but only one is a guaranteed winner.
That company is my top AI stock pick for 2026, and it may come as a slight surprise.
Image source: Getty Images.
The computing unit suppliers are deadlocked in a fierce competition
The easy answer to which company is benefiting from the AI boom the most is Nvidia (NVDA +1.68%). Nvidia has been one of the best-performing stocks in the market since the AI megatrend kicked off in 2023 and has propelled the company to become the largest in the world by market cap. I think Nvidia will continue its dominance, but clearly, competition is rising.
AMD (AMD 0.56%) is stepping up its game by improving its software in collaboration with OpenAI. Broadcom (AVGO +0.58%) continues to announce partnerships with AI hypercalers to develop their own custom AI chips that can outperform GPUs at a cheaper price point. While Nvidia is still the leader in this realm, the competition is heating up.
It's impossible to know which company will do the best over the next few years, but there is a way to invest in all three without worrying about which one will be the ultimate winner: Taiwan Semiconductor (TSM +0.90%).
NYSE: TSM
Key Data Points
Taiwan Semiconductor is the world's leading chip foundry, and a significant portion of the high-end chips used in devices from all three of these suppliers originates from TSMC's factories. Taiwan Semiconductor has risen to this level thanks to continuously launching cutting-edge technologies and being able to manufacture them at impressive yields.
One new technology that Taiwan Semiconductor is launching is its new 2nm (nanometer) chip node. This offers massive improvements over the previous 3nm generation. When configured to run at the same speed, the 2nm chip consumes 25% to 30% less power. That's a big deal because energy consumption is a huge focus in the AI buildout right now. If companies can use a lot less power and be able to retain their computing power plans, Taiwan Semiconductor will be able to charge a nice premium on these chips that AI hyperscalers will be happy to pay.
Those chips are entering production right now, so it may be a few quarters before we see technology launched with 2nm chips from AMD, Nvidia, or Broadcom, but their benefits are real and they're coming quickly. Even without this advanced chip node, TSMC is still doing incredibly well and has growth rates that rival the best in the AI revolution.
Taiwan Semiconductor is growing rapidly
During Q3, TSMC's revenue rose 41% year over year. That's faster than Broadcom and AMD's growth rates, and only trails Nvidia's most recent quarter (Nvidia grew at a 56% pace during that quarter).
Taiwan Semiconductor is also squeezing more profitability out of its business, despite massive expansion plans that include building several facilities in the U.S. and around the world.
Despite all of these impressive factors, Taiwan Semiconductor trades for a far lower price tag than any of the computing unit trio it supplies chips to.
TSM PE Ratio (Forward) data by YCharts
With Taiwan Semiconductor growing faster than most of its competition and trading at a far lower price tag, I think it's a no-brainer buy to take advantage of the AI buildout. Taiwan Semiconductor is an integral part of the AI arms race and deserves the same premium that the computing suppliers get. Because it isn't valued at the same premium as its peers, I think it's an excellent stock to buy now and should be a top performer during 2026.
