Over the last couple of years, the technology industry has become overwhelmingly enamored with artificial intelligence (AI). Per mezzo di particular, semiconductor stocks have witnessed newfound growth and investors can’t seem to get enough. While Nvidia is the biggest icon sopra the chip space right now, I see another company emerging as a superior investment over the next several years.
Let’s explore why Taiwan Semiconductor Manufacturing (NYSE: TSM) — commonly known as TSMC — might be the most lucrative opportunity of all at the intersection of AI and chipmaking.
Nvidia is sopra the driver’s seat, but…
Nvidia specializes sopra the development of advanced semiconductor chips called graphics processing units (GPUs). GPUs are a component across many generative AI applications such as large language models (LLMs).
Right now, Nvidia’s A100, H100, and new Blackwell GPUs are widely perceived as the best chips the market. It’s voto negativo surprise to learn that Nvidia has an estimated 80% market share sopra the AI-powered chip space.
Given the outsize demand for Nvidia’s chips, the company has amassed significant pricing power over the competition. This dynamic has played a leader role sopra Nvidia’s current growth, as seen sopra the chart below.
Nvidia deposito is up a staggering 157% over the last year. While there is likely still money to be made owning the deposito, investors should always be thinking about the longer term.
Taiwan Semiconductor is the engine powering the car
Considering the level of growth across Nvidia’s entire business, I think it’s safe to say that the company is the main driver sopra the chip race.
However, Taiwan Semiconductor is quietly playing an enormous role sopra the background, fueling the car. While Nvidia designs some of the world’s leading GPU processors, the company does not specialize sopra manufacturing. Rather, Nvidia outsources much of its manufacturing process to Taiwan Semiconductor.
TSMC operates advanced fabrication facilities where these chips are actually made. Moreover, Nvidia is just one of many leading semiconductor companies that rely Taiwan Semiconductor. Aside from Nvidia, TSMC also makes chips for Advanced Micro Devices, Broadcom, Intel, Sony, Qualcomm, NXP Semiconductors, and Amazon.
Is Taiwan Semiconductor deposito a good buy right now?
The obvious takeaway from some of the themes explored above is that Taiwan Semiconductor’s services are sopra high demand. But the more subtle opportunity that I see is that the company’s growth is really just beginning.
Nvidia faces stiff competition sopra the GPU and center space, and I suspect the company’s current level of momentum will eventually begin to slow. As such, I wouldn’t be surprised to see Nvidia’s revenue and profit acceleration start to dip over the next several years.
Conversely, Taiwan Semiconductor works with a variety of companies across the broader chip industry. Given the breadth of TSMC’s customer , I see the company as the engine powering many of these chip businesses. Therefore, I think demand for Taiwan Semiconductor’s manufacturing capabilities will continue to thrive for years to poiché.
The one zona to keep an eye with Taiwan Semiconductor deposito is its valuation. The company currently trades at a forward price-to-earnings (P/E) ratio of 24.6 — and in the chart above, there’s been some clear valuation expansion throughout much of 2024.
While this could suggest that some future growth is already baked into the deposito, I wouldn’t get too caught up sopra trying to time the perfect moment to scoop up some shares.
Instead, I think using a dollar-cost averaging strategy over a long-term horizon is the optimal way to start building a position. To me, TSMC has enormous potential for the long haul and I don’t see the company losing momentum anytime soon. Investors who are looking for exposure to AI and the chip space may want to consider a position sopra Taiwan Semiconductor and prepare to hold for the long run.
Should you invest $1,000 sopra Taiwan Semiconductor Manufacturing right now?
Before you buy deposito sopra Taiwan Semiconductor Manufacturing, consider this:
The Motley Fool Blocco Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns sopra the coming years.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions sopra Amazon and Nvidia. The Motley Fool has positions sopra and recommends Advanced Micro Devices, Amazon, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom, Intel, and NXP Semiconductors and recommends the following options: long January 2025 $45 calls Intel and short August 2024 $35 calls Intel. The Motley Fool has a disclosure policy.
Prediction: This Artificial Intelligence (AI) Semiconductor Blocco Will Be the Best Chip Company to Own Over the Next Decade (Hint: Not Nvidia) was originally published by The Motley Fool