Beyond Nvidia, AMD, and Broadcom: Why This Chip Stock Will Emerge as the Biggest Winner of the AI Semiconductor Boom

Incredible demand for artificial intelligence (AI) compute has driven sales at some of the biggest chipmakers to new heights. Nvidia has been one of the biggest beneficiaries of demand for compute, as its GPUs offer unparalleled computing power. Advanced Micro Devices is also seeing strong demand for its competing GPUs. Meanwhile, Broadcom has emerged as a key partner for several hyperscalers designing their own chips for AI training and inference.

But the biggest winner in AI semiconductors won't be any of those massive chipmakers. It's the company with both the technology and the scale to support the growing semiconductor industry. Here's why Taiwan Semiconductor Manufacturing (NYSE: TSM) will emerge as the biggest winner of all among the semiconductor stocks.

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The biggest winner of the AI semiconductor boom

After years of incredible growth for Nvidia and AMD, there's cause for concern about the future of their businesses and the place of their chips in hyperscale data centers. Some of the biggest concerns regarding hyperscale build-outs are the costs. Capital constraints are becoming a meaningful factor in some buying decisions for these companies, as they grow increasingly reliant on debt to fuel their continued build-outs.

While GPUs will always have a place in AI data centers, a growing portion of chips are custom silicon. Amazon said the majority of its new chip purchases will be its own Trainium chips this year. CEO Andy Jassy said using Trainium chips saves the company tens of billions of dollars in capital expenditures each year. Likewise, Alphabet is using more and more of its own chips, TPUs, and it has started selling TPUs to select third parties.

To that end, investors may think the biggest winners will be the chipmakers hyperscalers partner with to design custom AI accelerators. Google's TPUs are built on top of Broadcom's IP. But those designs tend to be more fickle. Google is reportedly in talks with Marvell Technology for new TPU designs. Marvell once held the design for Amazon's Trainium chips, but the third and fourth generations of the chip design went to AIChip.

But regardless of who designs the chips for training and running artificial intelligence in hyperscale data centers, they all rely on TSMC to print and package those chips. That's a constant, unlikely to change, given TSMC's significant technological lead and massive scale.

The competitive advantages create a virtuous cycle

TSMC is the world's largest contract chip manufacturer. It accounted for 73% of all spending on third-party manufacturing in the first quarter of 2026, and that share has increased over the last few years as AI accelerators have fueled spending growth. AI chips require the most advanced manufacturing technology to achieve peak performance. That's where TSMC can separate itself from the competition.

Even as some competitors begin to make advances on TSMC's technology in certain edge cases, the Taiwanese company also benefits from its massive scale. Given the significant demand for AI chips, no other semiconductor manufacturer has the capacity to print and package chips at the required quality and speed. Even TSMC itself is facing capacity shortages. That's why management is spending another $60 billion to $64 billion in capital expenditures this year, up from $40.9 billion last year.

TSMC's scale also allows it to spend heavily on research and development to produce the next generation of technology. And with a roster of big-name clients, it can work closely with engineering teams to ensure it meets their forthcoming needs. As a result, it can maintain a significant technological lead by outspending the competition, even if R&D accounts for just 6% of total revenue.

That creates a virtuous cycle. TSMC wins big contracts, builds out more capacity, spends more on R&D, and wins new big contracts that only it has the capacity to serve. The strong demand from the AI boom has also enabled it to raise prices across its manufacturing services, resulting in very strong gross margins even as it ramps up new technology (which typically weighs on gross margins).

Despite the strong growth projected for the business, investors are only paying 24.5 times forward earnings expectations. Considering analysts are currently projecting earnings-per-share growth of 30% over the next two years, that's an incredible price to pay for the dominant business in the industry.

Adam Levy has positions in Alphabet, Amazon, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Broadcom, Marvell Technology, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.