Nvidia's CEO Just Delivered Incredible News for Taiwan Semiconductor Manufacturing Stock Investors
TSMC is set to benefit from continued massive spending in AI.
When Nvidia CEO Jensen Huang talks about the future of artificial intelligence (AI), investors listen. Huang recently predicted that global spending on AI infrastructure will surge from $600 billion this year to as much as $3 trillion to $4 trillion by the end of the decade. That is a massive increase, and it is going to require a lot of advanced chips.
Huang also recently went out of his way to praise Taiwan Semiconductor Manufacturing (TSM -1.59%), calling it “one of the greatest companies in the history of humanity” and saying that “anybody who wants to buy TSMC stock is a very smart person.” Coming from the head of the world’s most valuable company, that is not the kind of endorsement you hear every day.
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What makes TSMC special
Manufacturing semiconductors isn’t easy. It requires technological expertise, and fabs (manufacturing facilities) need to be running near full capacity to be profitable. The process for making these complex chips can involve 700-plus steps, with the potential for excess waste overshadowing each step. Such complexity means producing these chips at scale requires real expertise. That is why today most chipmakers don’t make their own chips, but instead send their designs to contract manufacturers.
That is where TSMC comes in. It is the world’s leading semiconductor contract manufacturer and the company that advanced chip designers turn to when they need their designs manufactured at scale. It runs the most advanced chipmaking facilities on the planet, known as foundries, and is the clear leader in producing advanced chips, like graphics processing units (GPUs), with the smallest nodes. Smaller nodes pack more transistors on each chip, which makes them faster and more efficient. This is not easy to do, and rivals like Intel and Samsung have struggled to match TSMC’s yields.
That is why every major AI chipmaker, from Nvidia to Broadcom to AMD, relies on TSMC. It wins no matter who comes out on top in the AI chip design race, because they all need its manufacturing expertise.
TSMC’s advantage is more than just its scale. It has consistently led the industry in shrinking node sizes and moving production into high volume quickly. Nearly three-quarters of its revenue now comes from chips built on nodes of 7 nanometers or smaller, with 3nm chips already making up nearly a quarter. The company is already preparing to roll out 2nm production, keeping it ahead of competitors and locking in its customers for years to come.
That technological lead has given TSMC strong pricing power. It has been able to steadily raise prices while still keeping its customers happy, which is why its gross margin has climbed over the last several years even as it spends heavily on new fabs.
The AI opportunity is massive, and TSMC is in the perfect spot to capture it. The company has said that AI chip demand should grow at more than a 40% compound annual growth rate (CAGR) through 2028. That is the kind of growth runway that few companies can match, and it gives TSMC years of visibility into its own expansion. It is already working closely with its largest customers to secure capacity and meet their growing demand.
AI is not the only major growth driver either. If robotaxis really do start lining city streets later this decade, they will each need multiple powerful chips to process real-time driving data safely. That could become another huge market for TSMC. The same goes for emerging technologies like robotics and quantum computing, which will require cutting-edge chips. Wherever computing power is headed, TSMC is likely to be right in the middle of it.
Is TSMC stock a buy?
Despite its critical role in the semiconductor ecosystem, TSMC still flies a bit under the radar. It is also currently one of the best values in the semiconductor space, trading at a forward price-to-earnings (P/E) ratio of 23 times based on analysts’ 2026 estimates, despite the huge growth still in front of it.
Investors looking for a way to play the AI infrastructure buildout should take Huang’s advice seriously. TSMC is one of the best-positioned companies in the world to benefit from the coming AI spending boom, and it might just be the smartest stock to buy and hold through the next decade.
Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: short November 2025 $21 puts on Intel. The Motley Fool has a disclosure policy.