This Forgotten AI Stock Is Up 689% and Nobody’s Talking About It

After years of being a theoretical and futuristic idea, artificial intelligence (AI) took the world by storm when OpenAI launched ChatGPT in 2022. Since then, companies driving AI development have become the darlings of the market and investors are looking for the next big trend. It started with the big players like Nvidia And Broadcomhas turned its attention to data centers and energy companies like CoreWeave And Flowering Energyand more recently focused on memory powerhouses like Sandisk And Micron.

However, there is one fantastic AI giant that is a vital part of the powerhouse, growing fast and highly profitable, but is often overlooked: Taiwan Semiconductor (NYSE:TSM). Shares of Taiwan Semi, or TSMC, have gained 689% since ChatGPT launched, and there are plenty of upside prospects.

Did you miss Nvidia in 2009? This rare signal flashes again. In 2009, a “Double Down” signal sounded for a little-known chipmaker called Nvidia. For the first time in years, this same signal of “total conviction” rings out for a company a hundredth the size of Nvidia. Continue “

TSMC’s role in AI

TSMC is a foundry and makes the chips according to customer designs, which means it makes the physical components. It has partnerships with all the biggest semiconductor companies including Nvidia, Broadcom and Amazonas well as with other tech giants like Apple. It has a dominant position in semiconductor manufacturing and benefits from all of its customers’ growth. So instead of deciding to bet on Nvidia or Intelfor example, an investment in TSMC bets on both.

AI has led to incredible growth overall, and management expects this trend to continue. CEO CC Wei noted overwhelmingly positive AI signals from its hyperscaler customers and said “management’s belief in the multi-year AI megatrend remains very high.”

Since the company serves many customers in varied fields, it benefits from all kinds of AI growth. Nvidia is best known for its graphics processing units (GPUs), which have the processing power to meet high AI needs, but TSMC makes the central processing units (CPUs) that have put Intel back in the spotlight for the role they play in agentic AI.

In the second quarter, revenue grew 34% year over year, beating forecasts. Gross margin improved 1.5 percentage points to 67.7% and operating margin improved 2.2 percentage points to 60.3%.

The company is investing for the future by opening new sites, notably in the United States last year. It has an operational facility in Arizona. This allows it to avoid tariffs and get closer to many of its biggest customers, like Nvidia and Apple, which are headquartered in California.

Management expects some near-term gross margin pressure from all of its investments, but CFO Wendell Huang noted that “a higher level of capital spending always correlates with higher growth opportunities in subsequent years.”

As AI continues to develop, betting on TSMC is a low-risk, high-opportunity play that should reward investors for years to come.

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Jennifer Saibil holds positions in Apple and Taiwan Semiconductor Manufacturing. The Motley Fool holds positions and recommends Amazon, Apple, Bloom Energy, Broadcom, Intel, Micron Technology, Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

This Forgotten AI Stock Is Up 689% and Nobody’s Talking About It was originally published by The Motley Fool