With the rise of artificial intelligence (AI), there are a lot of great tech stocks in the market today. Tech stocks are my favorite segment because these companies are bringing about monumental changes in how we live and work every day.
Today, many of those changes are coming from AI, as we are finding new ways to be more efficient. AI is growing as a tool for automating workflows, managing supply chains, providing customer service, predicting future events, and detecting fraud. Fortune Business Insights projects the AI market to grow from $375.9 billion this year to $2.48 trillion by 2034, for a compound annual growth rate of 26.6%.
There are many ways to invest, but if you have just $1,000, you could do much worse than Taiwan Semiconductor Manufacturing Co. (TSM +0.72%). I think TSMC, as it's better known, is the closest thing you'll get to a surefire winner in the long term.
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What does Taiwan Semiconductor do?
TSMC is an important company in the production of semiconductor chips, which power personal computers, tablets, smartphones, and other devices. When we're talking about AI, these chips are bundled by the thousands and used in data centers to power complex AI programs. Nvidia's graphics processing units are the most well known, but there are plenty of other companies that design chips, including Broadcom and Advanced Micro Devices.
But while those companies are designing the chips, they can't make them without a foundry. And TSMC is the biggest foundry in the world. TSMC says it produced more than 11,800 products across 288 separate processes in 2024, giving it unparalleled reach in the industry.
NYSE: TSM
Key Data Points
Why TSMC is a smart play
TSMC's broad reach means that it's never short on customers. The company is continuing to grow rapidly. Revenue in the fourth quarter was $33.73 billion, up 25.5% from a year ago. TSMC reported a profit margin of 48.3%.
Customers are lining up to use TSMC because it has proven expertise in making the most powerful chips.
Chips with smaller transistors are more powerful and efficient, and TSMC must continue to evolve to meet demand. In 2023, TSMC was getting more than half of its revenue from chips larger than 7 nanometers, but today it's producing more 3nm and 5nm chips. Management said in the fourth quarter that 3nm chips accounted for 28% of the company's total shipments, up from 23% in the third quarter. Chips that were 5nm accounted for 35% of all shipments, down from 37%.
I think investing in AI infrastructure is the best way to play tech stocks today, and TSMC is the best pure play to do so. No matter whether Nvidia continues its dominance or other companies eat into its market share, TSMC will almost certainly be the foundry of choice for building the chips. I think it's the best tech stock to invest $1,000 in today.
