Is Taiwan Semiconductor (TSM) Still The Best AI Chip Stock to Buy?

Cathie Wood’s 11 Biggest AI and Data Center Stock Picks. Taiwan Semiconductor (NYSE:TSM) ranks #8 (see Cathie Wood’s 5 Biggest AI and Data Center Stock Picks).

Taiwan Semiconductor Mfg Co Ltd (NYSE:TSM) is perhaps the most critical cogwheel in the AI revolution. It manufactures the world’s most advanced semiconductors for companies that design chips but don’t own fabrication plants. TSM has about 62% of the total foundry market and over 90% of the market for advanced nodes (7nm and below). Taiwan Semiconductor’s (NYSE:TSM) customers don’t switch because finding other chip foundries is extremely hard, if not impossible.

The scale of demand in this cycle is clearly visible in the numbers. In Q1 2026, Taiwan Semiconductor (NYSE:TSM) revenue rose 35% year over year, showing a sharp acceleration in business momentum. For Q2, the company is guiding for about 32% year-over-year revenue growth, and for the full year 2026, it expects more than 30% revenue growth.

Apple relies on Taiwan Semiconductor (NYSE:TSM) for chips, including for A-series and M-series. Taiwan Semiconductor makes AI GPUs for Nvidia used in data centers. AMD, Qualcomm, Broadcom, MediaTek and Marvell also rely on it for production. Read what a Broadcom executive recently said about the demand Taiwan Semiconductor (NYSE:TSM) is facing here.

Wedgewood Partners stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q1 2026 investor letter:

“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was a top contributor to portfolio performance in the first quarter. Revenues grew +25%, and the Company guided to accelerating revenue growth to +30% in 2026 as demand for compute accelerators for AI applications continues to ramp unabated. In addition, the Company recently reported that March revenue was up +45% year over year, +31% month over month, and +35% year to date. The semiconductor customer base has evolved ....” (Click Here to Read the Letter in Detail)

While we acknowledge the potential of TSM as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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