This Chipmaker Is One of the Largest Companies by Market Cap. But Is Its Stock a Buy?

• Virtually each precocious AI chips are made by Taiwan Semiconductor Manufacturing (TSMC).

• TSMC's manufacturing quality and ratio are good up of those of its closest competitors.

• High-performance computing has overtaken smartphones arsenic TSMC's biggest gross generator.

• 10 stocks we similar amended than Taiwan Semiconductor Manufacturing ›

The mean idiosyncratic who deals with artificial quality oregon AI (typically done generative AI apps similar OpenAI's ChatGPT and Alphabet's Gemini) is alert of what it tin do, but galore aren't alert of conscionable however those tools tin enactment truthful effectively. One reply is the chips that powerfulness the information centers that marque grooming and scaling up AI possible.

When it comes to manufacturing these AI chips, there's 1 institution that's light-years up of its competition: Taiwan Semiconductor Manufacturing (NYSE: TSM) (TSMC). After rising implicit astir 54% successful 2025, TSMC has a marketplace headdress of implicit $1.7 trillion, making it 1 of lone 11 companies successful the trillion-dollar nine (as of Jan. 13).

Considering however palmy TSMC's 2025 was, is the banal inactive a bargain close now, oregon should investors beryllium disquieted astir the precocious valuation? In my opinion, it's easy the former.

TSMC uses a foundry model, manufacturing chips for companies' products alternatively than selling them to the wide public. For example, Apple volition plan the chips it needs for its latest iPhone and instrumentality the plan to TSMC, and TSMC volition usage its manufacturing powerfulness to make the carnal chip.

For a while, smartphones were TSMC's biggest moneymaker. It manufactured chips for companies similar Apple and Qualcomm. However, with the accrued request for precocious AI chips, the high-performance computing (HPC) conception has taken the throne implicit the past mates of years.

Data source: TSMC.

Looking specifically astatine dollars, here's however overmuch the HPC conception has made for TSMC successful those quarters:

• Q3 2025: $18.87 billion

• Q3 2024: $11.99 billion

• Q3 2023: $7.26 billion

• Q3 2022: $7.89 billion

• Q3 2021: $5.51 billion

The detonation successful HPC gross -- from $7.26 cardinal successful Q3 2023 to $18.87 cardinal successful Q3 2025 -- aligns with the accrued request for precocious AI chips and information halfway expansions. For perspective, TSMC's HPC gross successful Q3 2025 exceeded its total gross successful Q3 2021 ($18.87 cardinal versus $14.88 billion).

AI chips person gotten a batch of attraction for TSMC precocious (and rightfully so), but if you're investing successful the company, you cognize you're getting a staple successful the tech institution extracurricular of conscionable AI chips. Everything from smartphones to computers to TVs to cars to tablets relies connected TSMC-manufactured chips.