1 No-Brainer Semiconductor Stock to Buy With $1,000 Right Now

Semiconductor stocks have become popular investments thanks to the high usage of chips in AI. However, by investing in this industry, you're also making a bet that semiconductor usage will go up in other areas. As products like humanoid robots, autonomous driving, and drone delivery increase in usage, so will chip demand.

By investing in a company like Taiwan Semiconductor Manufacturing (NYSE: TSM), you're making the proclamation that we are going to use a greater quantity of chips and more advanced chips in the future. That seems like a no-brainer bet, which is why Taiwan Semiconductor is a great option to invest $1,000 in right now.

Image source: Getty Images.

Taiwan Semiconductor is seeing huge growth from AI chip demand

While Taiwan Semiconductor makes semiconductors for multiple industries, the biggest demand is from AI. The company has informed investors that from 2024 to 2029, it expects the AI chip market to increase at a mid- to high-50% compound annual growth rate (CAGR). That's a monster growth opportunity, and backs up the company's large capital expenditure plans to increase chip production.

While some investors may worry about what will happen with that excess chip capacity once the AI buildout is complete, I think they need to look toward other technologies, such as those listed above. Furthermore, AI computing hardware has a relatively short lifespan and burns out within a few years of usage. So, there will always be a base demand in the AI realm for new chips to replace the old ones. Additionally, just like every other industry, there will always be demand for more efficient and advanced hardware, and Taiwan Semiconductor's continual innovation will help drive that.

Taiwan Semiconductor is the world's largest chip foundry by revenue, making it the top pick in this space. It is also the primary logic chip provider for nearly every major AI computing unit provider, and there aren't many alternatives that have the capacity and technology that Taiwan Semiconductor has. This makes it a prime pick in this space, yet its stock remains reasonably valued.

TSM PE Ratio (Forward) data by YCharts

At 23.6 times forward earnings, the stock trades at a slight premium to the broader market. However, with its strong, long-term AI growth in hand, I think it's still an excellent investment option that investors should consider to be able to play all facets of the AI arms race. Regardless of whose computing unit is being used, Taiwan Semiconductor is likely making the chips. This makes it a no-brainer buy, and I'm confident that it will be a market outperformer over the next decade.

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