Billionaire Stanley Druckenmiller Just Bought More of My Favorite Artificial Intelligence (AI) Pick

Key Points

• The Duquense Family Office purchased Taiwan Semiconductor stock in Q2.

• Taiwan Semiconductor is a key supplier for many leading tech companies.

• Shares of TSMC still don't look too expensive even at current levels.

• 10 stocks we like better than Taiwan Semiconductor Manufacturing ›

With the latest rounds of 13Fs available to investors, they can see what billionaire hedge fund managers have been doing with their money lately. Every quarter, these funds must disclose their end-of-quarter holdings to the Securities and Exchange Commission (SEC), which is then made available to the public 45 days later in a Form 13F.

One investor I like to follow is the Duquense Family Office, managed by longtime investment manager Stanley Druckenmiller. One thing that encouraged me is that Druckenmiller increased his position in my favorite artificial intelligence (AI) stock: Taiwan Semiconductor Manufacturing (NYSE: TSM). He increased his stake in TSMC by 28% in the quarter, showing a bullish outlook.

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However, this information comes out 45 days after the quarter is over, so it's dated. The question now is whether Taiwan Semiconductor is still worth an investment. Let's take a closer look.

Image source: Getty Images.

Taiwan Semiconductor's growth is rapid and accelerating

Taiwan Semiconductor -- or TSMC, as it's often called -- is a leading chip manufacturer and operates the world's premier chip foundry business. TSMC has become the chip manufacturer of choice for several leading companies, including Nvidia (NASDAQ: NVDA) and Apple (NASDAQ: AAPL). By being exposed to several key trends, including AI, it has delivered impressive growth that shows no signs of slowing down.

TSM Revenue (Quarterly YoY Growth) data by YCharts

Management is bullish about its long-term outlook and is increasing production capacity to meet the demand. Most notably, TSMC is investing $165 billion in the U.S. to get its Arizona chip factory up and running, which will help its clients avoid tariffs and have a more dependable supply chain. This makes TSMC a smart company to partner with, but it's also a proven innovator.

While other chip foundries have struggled to develop leading chip technologies that have high yields, TSMC has consistently innovated. While 3 nanometer chips are the current leading technology, 2nm chips are slated for launch later this year, and TSMC is already working on new technologies following that milestone.

This dedication to continuous improvement makes me bullish on Taiwan Semiconductor's future, and likely is a strong reason why Druckenmiller purchased shares during the quarter. But is it still a solid buy right now?

Taiwan Semiconductor's stock is fairly priced

Unlike many AI-centric companies, Taiwan Semiconductor doesn't trade at a huge premium to the broader market. With the stock trading for just shy of 25 times forward earnings, it's priced at nearly the same level as the S&P 500, which trades for 24.1 times forward earnings.

While these levels aren't historically cheap, Taiwan Semiconductor is well-positioned to ride the massive wave of AI spending, mainly focused on data centers. With many of the AI hyperscalers informing investors that capital expenditures would rise in 2026 due to data center buildouts, it's a bullish sign for Taiwan Semiconductor.

TSM PE Ratio (Forward) data by YCharts

All of this adds up to a stock that's still worth buying at these levels. Taiwan Semiconductor is a top investment pick in the AI realm, and recent purchases by billionaire hedge fund managers like Druckenmiller support this view. We're still in the early innings of AI buildouts, and Taiwan Semiconductor still has plenty of room to run.

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Keithen Drury has positions in Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.