This Tech Stock Is the Quiet Monopoly Nobody on Wall Street Talks About

Taiwan Semiconductor (TSMC) (NYSE: TSM) is the quietly dominant semiconductor manufacturer. Since most of the prominent chip design companies are fabless, they most often turn to TSMC.

Admittedly, TSMC has not earned the returns of some of its most prominent clients, which include Nvidia, Apple, and Broadcom. Nonetheless, this stock could pay off for investors.

Image source: The Motley Fool.

Why TSMC?

Since the aforementioned companies contract out their chip manufacturing, TSMC is arguably one of the most essential artificial intelligence (AI) companies. Thanks to its advancements, it controls more than 70% of the overall chip market, and its market share rises above 90% for the most advanced semiconductors.

Unfortunately, investing in the company comes with one key risk: its location. As its name implies, most of its manufacturing takes place in Taiwan, an island that China has threatened to invade for decades. China's dependence on TSMC chips may reduce the odds of such an event, but the possibility has unnerved many investors, including Warren Buffett.

Still, TSMC has increased its presence in countries like the U.S. Also, it has become one of the most profitable companies in the world.

In the first quarter of 2026, revenue of $35 billion rose 35% from year-ago levels amid the unprecedented demand for chips. That was well ahead of the 31% increase in 2025.

This resulted in almost $20 billion in comprehensive income for the quarter, 60% more than last year. In comparison, comprehensive income rose by 33% in 2025. Additionally, with a 35% revenue increase forecast for 2026, growth is not on track to slow in the near term.

Moreover, considering the 120% rise in the stock price over the last year, the company seems to have earned some respect from investors. Interestingly, its P/E ratio has also risen in recent years, so much so that its 33 earnings multiple is nearly at parity with Apple's 34 P/E ratio.

Still, even with the risks, a 33 P/E ratio seems inexpensive considering the 60% income growth from Q1, and even the 33% rise in 2025. That situation may have led to investors bidding up its stock price.

Investing in TSMC

When considering its position in the technology market, TSMC is clearly one of the most essential AI stocks that nobody talks about, and it offers considerable growth for the money.

Indeed, some investors may want to own TSMC, with a Taiwan invasion being a remote but real possibility. However, since China also needs its chips, an attack is probably against its self-interest. Amid that demand from China, the U.S., and other markets, revenue and profit continue to grow at a rapid clip.

Finally, when also considering its valuation relative to growth, it could easily pay for investors to hold a position in this chip stock.

Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Broadcom, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.