Selecting a single stock to buy and hold isn't an easy task. It's also a terrible investing strategy. However, I think it's a good exercise for investors to go through to understand what they are most confident in, then position their portfolios accordingly.
For me, the best stock to buy and hold is one that is set up to win in the current market environment, with little worry of disruption. I think that Taiwan Semiconductor (TSM 4.54%) fits the bill, and I've got a few reasons why that's the case.
Image source: Getty Images.
1. Taiwan Semiconductor will be the ultimate winner of the AI buildout
Companies are spending billions of dollars on artificial intelligence infrastructure, and are tripping over themselves to build data centers. They seemingly cannot get the computing power online fast enough to meet demand. There is also a bottleneck in computing, but while Nvidia's graphics processing units (GPUs) have been the most widely used computing hardware, that dominance is coming into question.
NYSE: TSM
Key Data Points
I believe Taiwan Semiconductor will be the ultimate winner in AI, as it provides chips for most computing units. While it has some competition, Taiwan Semiconductor has the best technology and the most production capacity, giving it an edge over some of its peers.
Being a neutral party in the AI race will pay off for Taiwan Semiconductor, as it's expected to continue growing as long as data center capital expenditures continue rising.
2. Data center capital expenditures are expected to continue growing
Many investors have balked at some of Nvidia's long-term projections, but most of those projections have come true. Its latest guidance is even more extreme, but Nvidia has more knowledge about the situation than many individual investors do. It projects that global data center capital expenditures will rise to $3 trillion to $4 trillion by 2030. That's huge growth from the $600 billion expected in 2025, and Taiwan Semiconductor will be a key provider of the chips used to realize this growth.
3. Taiwan Semiconductor's new technology addresses key concerns
Taiwan Semiconductor is known for consistently introducing new chip technology, and 2026 will be no exception. Its latest chip generation, 2 nanometers (nm), is currently entering production and features some incredible improvements that clients have been clamoring for.
The AI buildout may be slowed by the limited availability of energy. There are a few ways to alleviate this problem, and one of them is to make more energy-efficient hardware. Taiwan Semiconductor has accepted this challenge, and its new 2nm chips consume 25% to 30% less power than previous generation 3nm chips when configured to run at the same speed. These chips will be crucial in securing the next wave of AI growth, and with even more energy-efficient chips in development, Taiwan Semiconductor is expected to provide the advancements AI hyperscalers need to complete their build-out.
4. Taiwan Semiconductor's stock doesn't carry a large premium
Many of the AI hyperscalers trade for an expensive price tag, but Taiwan Semiconductor is an exception.
TSM PE Ratio (Forward 1y) data by YCharts.
At 23 times 2026 earnings, it's not priced at that high a premium compared to some of its peers. It's also expected to continue its rapid growth beyond 2026, so the price you pay now is well worth it.
Taiwan Semiconductor is a key part of the AI buildout, and its chips power many of the devices used to create generative AI today. Its competition is far enough behind that Taiwan Semiconductor doesn't need to worry about losing its leadership role as long as it continues to innovate. It's my top stock to buy and hold now, and I'm confident in its ability to crush the market in 2026.
