The boom in artificial intelligence (AI) looks like it is just beginning and could continue to ramp up over the next decade. Famed investor Cathie Wood's Ark Invest recently predicted that AI data center spending could triple from around $500 billion to $1.4 trillion by 2030. The investment firm predicts that the bulk of this spending will be on graphics processing units (GPUs), but that AI ASICs (application-specific integrated circuits) will take meaningful market share.
One of the companies best positioned to be a winner in this environment is Taiwan Semiconductor Manufacturing (TSM 4.44%).
NYSE: TSM
Key Data Points
An AI infrastructure winner
The great thing about TSMC is that the company wins regardless of how much market share artificial intelligence ASICs take or don't take away from GPUs. The foundry is the leading manufacturer of both types of chips and has close relationships with all the top AI chip designers, including Nvidia and Broadcom.
It's also the top manufacturer of other advanced chips, like those used for smartphones, and Apple is one of its largest customers, just recently being surpassed by Nvidia. As new markets with needs for advanced chips, such as autonomous driving and robotics, continue to expand, TSMC is also set to benefit.
Image source: Taiwan Semiconductor Manufacturing.
Meanwhile, TSMC has a near monopoly on the manufacturing of advanced chips. Its main rivals, Intel and Samsung, have both struggled to produce advanced logic chips at scale with high yields. Intel's foundry business, meanwhile, is bleeding cash, while Samsung has turned more of its focus to the booming memory market, where TSMC does not compete. This essentially makes the foundry the only game in town for the large-scale manufacturing of advanced chips. This has given the company strong pricing power, with reports that it's already laid out to customers a four-year schedule of price hikes. Its pricing power has also helped TSMC expand its gross margin.
Moving forward, TSMC sees its AI revenue growing at a mid- to high-50% compound annual growth rate (CAGR) until 2029. Demand is so strong, it significantly boosted its capital expenditure (capex) budget this year to between $52 billion and $56 billion, up from less than $41 billion in 2025. The company did a ton of due diligence to confirm that long-term trends will remain strong, and is working closely with top chip designers to help them meet their growing demand.
With the stock trading at a forward price-to-earnings (P/E) ratio of 24 times based on analysts' 2026 estimates, and a forward price/earnings-to-growth (PEG) ratio of 0.7 (with PEGs below 1 considered undervalued), this is a reasonably valued AI stock to own for the next decade.
