3 Reasons to Buy TSMC Stock Like There's No Tomorrow

Will 2026 be another incredible year for artificial intelligence (AI)? So far, signals are all saying yes. The hyperscalers are planning to spend even more money than they did last year to build out their platforms, to the tune of hundreds of millions of dollars. And while there may be one winner crowned from all the builders, there's (at least) one company that benefits from all of them: Taiwan Semiconductor Manufacturing (NYSE: TSM).

Here are three reasons to buy TSMC stock right now.

Image source: Taiwan Semiconductor.

1. TSMC is reporting strong growth

TSMC reported 2025 fourth-quarter earnings last week, and it demonstrated continued strength. Here's how sales have increased year over year in the past four quarters:

Data source: Taiwan Semiconductor quarterly reports. YoY = year over year.

2025 sales for the full year increased 36%, and management is guiding for sales to rise another 30% in 2026. It's aiming for a compound annual growth rate of 25% through 2029, which is serious growth, especially for a company that's already as large as TSMC. It had $122 billion in 2025 revenue.

2. TSMC is highly profitable

TSMC is a capital-intensive business, since it plows money into its foundry plants that manufacture physical semiconductors. Despite that, it's incredibly profitable, with high sales volume and a disciplined cost structure.

In the fourth quarter, gross margin expanded from 59% in 2024 to 62.3% in 2025, and operating margin expanded from 49% to 54%. Management is guiding for gross margin to reach 63% to 64% in the 2026 first quarter and to stay above 56% long term, and for operating margin to be between 54% and 56% in the first quarter.

3. TSMC benefits from some strong AI tailwinds

The company is a lot more than AI, although that's an integral component of its model these days. High-performance computing (HPC), the segment that includes the AI business, accounted for 58% of revenue in 2025; its growth rate increased 48% year over year.

Capital expenditures (capex) were $41 billion in 2025, up from $30 billion in 2024, and management updated investors that increasing capex has always been correlated with high opportunities; it's investing in potential and the ability to meet high demand. To that end, it's raising capex spend to about $54 billion in 2026, with about 70% to 80% going to what it calls "advanced process technologies." In this case, the market is excited about higher capex spend, because it implies higher growth on the way.

Jennifer Saibil has positions in Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.