Artificial intelligence (AI) companies are facing greater scrutiny of late, as investors look beyond the hype and focus on companies capable of capitalizing on this disruptive tech trend.
This explains why AI software stocks were in sell-off mode this month following a product update from AI start-up Anthropic, which was seen as a threat to conventional software companies. However, hardware-oriented AI companies continue to be in the good books of investors, as evidenced by the 14% jump in the PHLX Semiconductor Sector index in 2026.
That's not surprising, as semiconductors have been playing one of the most important roles in the proliferation of AI -- training and deploying AI models. The huge productivity gains that AI applications are projected to deliver in the future wouldn't have been possible without semiconductor companies, and Taiwan Semiconductor Manufacturing (TSM 4.37%) is the leader in this sector.
Let's see why TSMC has been creating, and will continue to spawn, the next generation of leaders in the field of AI.
Image source: TSMC.
TSMC is the go-to manufacturer of chips that's going to enable next-gen AI applications
Anthropic's Claude Cowork agentic AI model caused a sell-off among software stocks because of its ability to complete tasks on its own. It's worth noting that Anthropic has a close relationship with chip designer Nvidia, whose chip systems are helping the AI start-up train and deploy its models.
Anthropic also announced in October last year that it would deploy Google's custom AI processors to run AI workloads in the cloud. However, the likes of Nvidia and Google go to TSMC to get their chip designs fabricated. Counterpoint Research estimates that TSMC has a 99% share of the AI server compute and custom AI processors manufactured. This makes TSMC the enabler of upcoming AI giants such as Anthropic.
NYSE: TSM
Key Data Points
Not surprisingly, TSMC has been growing at a remarkable pace. It clocked a 36% increase in revenue in 2025 to $122.4 billion, along with a 51% increase in earnings per share. Importantly, the company has gotten off to a solid start in 2026 as well, with its January revenue growing by almost 37% from the same month in 2025.
This pace indicates that TSMC could exceed its 2026 revenue growth target of 30%. Throw in the reportedly higher prices that the company is likely to command for its advanced chip nodes, and it seems on track for another year of solid bottom-line growth.
The long-term opportunity in AI chips should be a tailwind for the stock
RBC Capital Markets estimates that sales of AI chips could increase from $220 billion last year to more than $550 billion by 2028. We have already seen that TSMC is the foundry of choice for companies designing AI chips, putting it in the driver's seat to capitalize on the lucrative end-market opportunity.
That's why investors will do well to buy TSMC stock hand over fist right now. After all, the company's forward earnings multiple of 26 is almost in line with the tech-laden Nasdaq-100 index's reading. The good part is that its earnings are set to grow at a faster pace than the broader market, suggesting that investors can't go wrong with this semiconductor giant, given its important role in AI.
