The latest round of 13F filings is out, which means investors can see what billionaire hedge fund managers have been doing with their money. One firm I follow is Coatue Management, run by billionaire Philippe Laffont. In the fourth quarter, his firm bought 596,000 shares of one of my favorite artificial intelligence (AI) stocks: Taiwan Semiconductor Manufacturing (NYSE: TSM). That equates to around $120 million worth of TSMC stock, which is no small purchase.
After Q4’s buys, Taiwan Semi is now Coatue’s third-largest position, totaling nearly $2 billion. This is a big bet on the stock, but it will likely pay off if TSMC’s management’s predictions come true.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »
Taiwan Semiconductor manufactures chips for the world’s top tech companies
Taiwan Semiconductor is the world’s largest contract chip manufacturer. This means it takes chip designs from its clients and produces them on their behalf. This arrangement is great for all involved, as companies like Nvidia and Apple don’t need to worry about the ins and outs of chip manufacturing (a very difficult and capital-intensive process). Instead, they can focus on designing the best chip possible and leave the manufacturing work to Taiwan Semi.
Taiwan Semi is more than happy to participate in this arrangement, as it remains fairly neutral in the chip market. This means that TSMC manufactures chips for competitors like Nvidia and AMD, two companies that compete against each other in the GPU market. By remaining neutral, TSMC can offer its services to many clients, which is one of the reasons it has risen to become the world’s top chipmaker.
Taiwan Semi’s management sees massive growth in this important industry as the AI arms race continues to heat up. Over the next five years, management believes its AI-related chips can grow around a 45% compounded annual growth rate. That’s incredible growth from an already massive start in 2024 and is a vital clue from one of the companies most knowledgeable about how big the AI buildout will be.
Overall, management predicts that its total revenue CAGR will be near 20% over the next five years, which is outstanding growth considering that Taiwan Semiconductor is already a massive business.
This growth rate, combined with TSMC’s best-in-class chips, makes TSMC a stock that billionaires like Laffont want to own. It allows them a pretty low-risk way to make a huge profit in the AI arms race.
However, 13Fs only report quarter-ending activity, so the moves we are now learning about happened over a month and a half ago. So, is Taiwan Semiconductor still a strong buy today?
Taiwan Semi’s stock is valued like it’s just a market-average company
Since the start of 2025, Taiwan Semiconductor’s stock has risen under 3% for the year (at the time of writing), so it has barely budged from the prices that Laffont was comfortable holding on to.
Additionally, given Taiwan Semiconductor’s valuation, it looks like a dirt cheap stock.
TSM PE Ratio (Forward) data by YCharts
Taiwan Semiconductor’s stock trades for an attractive 22.4 times forward earnings. This is notable, as the S&P 500 has a valuation of 22.5 times forward earnings. So, the market is essentially saying that TSMC is a market-average stock.
However, with management guiding for around 20% revenue growth over the next five years, TSMC is far from an average stock. This mismatch between how the market is pricing the stock and where results will likely end up is a great opportunity for investors to load up on the stock. Coatue Management and Laffont understand this, which is why they decided to add $120 million to their TSMC stake in Q4. Taiwan Semiconductor is one of my top AI stocks to buy right now, and investors should load up on shares before they take off.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
- Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $363,307!*
- Apple: if you invested $1,000 when we doubled down in 2008, you’d have $46,607!*
- Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $552,526!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of February 21, 2025
Keithen Drury has positions in Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.