If I Could Only Buy 1 Artificial Intelligence (AI) Chip Stock Over The Next 10 Years, This Would Be It (Hint: It's Not Nvidia)

Key Points

• Taiwan Semiconductor Manufacturing holds nearly 70% of the global foundry market.

• Nvidia, AMD, and cloud hyperscalers alike rely heavily on TSMC's fabrication capabilities.

• As AI workloads become more sophisticated, the need for additional chips is inevitable.

• 10 stocks we like better than Taiwan Semiconductor Manufacturing ›

When investors debate the future of the artificial intelligence (AI) trade, the conversation generally finds its way back to the usual suspects: Nvidia, Advanced Micro Devices, and cloud hyperscalers like Microsoft, Amazon, and Alphabet.

Each of these companies is racing to design GPUs or develop custom accelerators in-house. But behind this hardware, there's a company that benefits no matter which chip brand comes out ahead: Taiwan Semiconductor Manufacturing (NYSE: TSM).

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Let's unpack why Taiwan Semi is my top AI chip stock over the next 10 years, and assess whether now is an opportune time to scoop up some shares.

Agnostic to the winner, leveraged to the trend

As the world's leading semiconductor foundry, TSMC manufactures chips for nearly every major AI developer -- from Nvidia and AMD to Amazon's custom silicon initiatives, dubbed Trainium and Inferentia.

Unlike many of its peers in the chip space that rely on new product cycles to spur demand, Taiwan Semi's business model is fundamentally agnostic. Whether demand is allocated toward GPUs, accelerators, or specialized cloud silicon, all roads lead back to TSMC's fabrication capabilities.

With nearly 70% market share in the global foundry space, Taiwan Semi's dominance is hard to ignore. Such a commanding lead over the competition provides the company with unmatched structural demand visibility -- a trend that appears to be accelerating as AI infrastructure spend remains on the rise.

Image source: Getty Images.

Scaling with more sophisticated AI applications

At the moment, AI development is still concentrated on training and refining large language models (LLMs) and embedding them into downstream software applications.

The next wave of AI will expand into far more diverse and demanding use cases -- autonomous systems, robotics, and quantum computing remain in their infancy. At scale, these workloads will place greater demands on silicon than today's chips can support.

Meeting these demands doesn't simply require additional investments in chips. Rather, it requires chips engineered for new levels of efficiency, performance, and power management. This is where TSMC's competitive advantages begin to compound.

With each successive generation of process technology, the company has a unique opportunity to widen the performance gap between itself and rivals like Samsung or Intel.

Since Taiwan Semi already has such a large footprint in the foundry landscape, next-generation design complexities give the company a chance to further lock in deeper, stickier customer relationships.

TSMC's valuation and the case for expansion

Taiwan Semi may trade at a forward price-to-earnings (P/E) ratio of 24, but dismissing the stock as "expensive" overlooks the company's extraordinary positioning in the AI realm. To me, the company's valuation reflects a robust growth outlook, improving earnings prospects, and a declining risk premium.

TSM PE Ratio (Forward) data by YCharts

Unlike many of its semiconductor peers, which are vulnerable to cyclicality headwinds, TSMC has become an indispensable utility for many of the world's largest AI developers, evolving into one of the backbones of the ongoing infrastructure boom.

The scale of investment behind current AI infrastructure is jaw-dropping. Hyperscalers are investing staggering sums to expand and modernize data centers, and at the heart of each new buildout is an unrelenting demand for more chips. Moreover, each of these companies is exploring more advanced use cases that will, at some point, require next-generation processing capabilities.

These dynamics position Taiwan Semi at the crossroad of immediate growth and enduring long-term expansion, as AI infrastructure swiftly evolves from a constant driver of growth today into a multidecade secular theme.

TSMC's manufacturing dominance ensures that its services will continue to witness robust demand for years to come. For this reason, I think Taiwan Semi is positioned to experience further valuation expansion over the next decade as the infrastructure chapter of the AI story continues to unfold.

While there are many great opportunities in the chip space, TSMC stands alone. I see it as perhaps the most unique, durable semiconductor stock to own amid a volatile technology landscape over the next several years.

Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now?

Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $651,599!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,067,639!*

Now, it’s worth noting Stock Advisor’s total average return is 1,049% — a market-crushing outperformance compared to 185% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 25, 2025

Adam Spatacco has positions in Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Intel, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft, short August 2025 $24 calls on Intel, short January 2026 $405 calls on Microsoft, and short November 2025 $21 puts on Intel. The Motley Fool has a disclosure policy.