Key Points
TSMC (NYSE: TSM), the world’s largest and most advanced contract chipmaker, might not initially seem like a high-growth artificial intelligence (AI) stock. Yet over the past five years, its shares have rallied by more than 170% as AI chipmakers lined up to use its plants. Let’s see why it could still be one of the best AI stocks hiding in plain sight for 2026 and beyond.
Why is TSMC a top AI stock?
TSMC, based in Taiwan and operating plants in other countries, manufactures the world’s smallest, densest, and most power-efficient chips. Most of the world’s “fabless” chipmakers — including Nvidia (NASDAQ: NVDA), AMD (NASDAQ: AMD), Broadcom (NASDAQ: AVGO), and Apple — rely on TSMC to produce their most advanced chips.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks »
Image source: Getty Images.
In 2025, TSMC’s revenue rose 36% in USD terms. Most of that growth was driven by its production of high-performance computing (HPC) chips — which include Nvidia and AMD’s AI-oriented data center GPUs. Its HPC revenue surged 48% during the year, accounting for 58% of its top line. Nearly all of its other markets grew by the double digits. It generated 60% of its revenue from its densest 3nm and 5nm processes.
TSMC’s gross and operating margins also expanded for the whole year, indicating it has ample pricing power as demand for new AI chips outstrips its capacity, and its EPS surged 46%. For 2026, it expects its revenue to rise nearly 30% in USD terms as the AI boom continues.
From 2024 to 2029, TSMC expects its CAGR to “approach 25%” in USD terms. Based on that rosy outlook, its stock still looks reasonably valued at 27 times forward earnings. It also expects its gross margin — which came in at 60% in 2025 — to stay above 56% through that cycle.
What are its near-term catalysts?
Many tech giants, including Microsoft (NASDAQ: MSFT) and Meta (NASDAQ: META), plan to significantly ramp up their AI infrastructure spending in 2026 and beyond. That means they’ll buy more AI chips from companies like Nvidia, AMD, and Broadcom — all of which need TSMC to manufacture their finished chips. TSMC also aims to maintain its process lead over other foundries by ramping up production of its smallest 2nm chips in the second half of 2026.
Moreover, TSMC will continue to expand its overseas plants — especially in Japan, the U.S., and Europe — to address the looming risks of a military conflict between Taiwan and China. All of these near-term catalysts should make TSMC a top AI stock to buy this year.
Should you buy stock in Taiwan Semiconductor Manufacturing right now?
Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:
The Motley Fool Stock 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 in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $429,385!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,165,045!*
Now, it’s worth noting Stock Advisor’s total average return is 913% — a market-crushing outperformance compared to 196% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of February 12, 2026.
Leo Sun has positions in Apple and Meta Platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.