Manufacture of Taiwan semiconductors(NYSE: TSM) may not design Artificial Intelligence (AI) Chips, but it is a company on which each manufacturer of Tamias of AI relies. AI giants rely on TSMC to make their designs of bin to bite number. This is why TSMC is the safest long -term game in IA’s infrastructure space.
Let’s see what makes the company so special.
TSMC is the most advanced semiconductor foundry in the world, and it has the main flea designers in the world among its best customers, including Nvidia,, Advanced micro-apparents,, BroadcomAnd Apple. It at the scale and technological leadership that rivals cannot correspond. Intel Burned money by trying to establish its foundry activity, while Samsung yield emissions continue to be a problem. This gave TSMC an enormous market advance on the advanced nodes, and it is not particularly close.
The nodes refer to the size of the transistors used on a chip, measured in the nanometers. The smaller the node, the more transistors can be packed on the chip, which increases the performance and efficiency of energy. The smaller knots become a larger part of the TSMC mixture. The fleas made on 7 Nm and smaller nodes represented 73% of its income in the first quarter, against 65% a year ago. Its 3 Nm node represented 22% of the income, and Apple has reserved a large part of its 2 nm supply for future products. Even Intel used 3 nm technology of TSMC for some of its most advanced chips. It says a lot.
TSMC’s clear leadership in space has also given the company a high price power. Between growing demand and price increase, this stimulates both strong growth in income and improved raw margins. In the latest quarter, its income jumped from 35% to 25.5 billion dollars, led by the growth of high performance IT (HPC). This continued in the second quarter, the company reporting preliminary income growth of 39% to 31.9 billion dollars, as it is estimated Reuters.
The margins remain strong despite a new FabS ramp. The gross margin increased from 190 base points to 58.8% in the first quarter despite its Arizona and Japan Fabs increasing and still weighing on profitability. TSMC expects these new installations to dilute the margins of 2 to 3 percentage points this year, but the company is already increasing prices to compensate for the pressure. According to reports, TSMC will increase the prices of IA fleas this year, the chips made in Arizona commanding a 30%bonus.
TSMC is not entirely without risks. Geopolitical tensions around Taiwan will always be part of history, and it is not immune to prices and policy changes in the United States, however, TSMC is already aimed both by widening its imprint on a global scale. The company has built new FAB in the United States, Japan and Europe in partnership with its greatest customers.
However, what makes TSMC the most sure semiconductor stock is its position in the value chain of semiconductors. It ultimately does not matter which company wins the race for the AI chip. The success of TSMC is linked to the overall demand for IA fleas, not the products of a company.
The request for fleas AI does not slow down either. TSMC previously provided IA income to increase at an average growth rate made up in the middle of 40% (TCAC) in the next five years, from 2024. It also works closely with customers to time its expansion of capacity. With its best customers reserving the future offer, it has solid visibility on future growth.
Meanwhile, it could see a rear wind beyond AI with an autonomous pipe. Robotaxy begins to take off and gain land, and all of these vehicles must be equipped with advanced fleas. It is still early, but if robotaxis and autonomous driving become commonplace, the TSMC will be a large beneficiary.
A slice of manufactured semiconductors.
In the Battle of Puces Ai, TSMC is essentially the AI arms dealer. He does not need to bet on who will dominate the flea market, because he sells manufacturing services to each of them. For investors who want an exhibition to AI semiconductors without betting on a single flea manufacturer, TSMC is the safest way to play it.
The action is also valued, negotiating with a price / benefit ratio (P / E) in the long term of 24 times on the basis of the 2025 analysts estimates and a price / profit ratio (PEG) less than 0.7. Stocks with PEG ratios less than 1 are generally considered to be undervalued.
Taken together, TSMC is one of the safest and safest actions to buy in the semiconductor space at the moment.
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Geoffrey Seiler Has no position in the actions mentioned. The Motley Fool has positions and recommends micro advanced devices, Apple, Intel, Nvidia and Taiwan Semiconductor manufacturing. The Motley Fool recommends Broadcom and recommends the following options: Court August 2025 $ 24 calls Intel. The Word’s madman has a Disclosure policy.
