Forget the Hype—TSMC Is the AI Stock That Actually Delivers

Key Points

• Taiwan Semiconductor stock's earnings show investors why the company is making, and could keep making, all-time high prices.
• Earnings show resilient dominance and growth happening right now in the AI boom.
• Wall Street analysts and institutional buyers keep backing the stock and its potential upside.

One of the longer-term booms in the stock market right now is right at the center of the technology sector, as the space is responsible for most of the returns now in the S&P 500 and Nasdaq-100 indexes. This feature is likely to continue into the future, considering how relatively early it is in the artificial intelligence race not only in the United States but worldwide.

With this tailwind in mind, investors can start to build their portfolio ideas and criteria around the companies that are best positioned to grow from this technology race, in some of the names that not only hold a large portion of the market but that also have made themselves indispensable for others who rely on them to keep developing the right technology and grabbing more market share.

This is exactly where shares of Taiwan Semiconductor Manufacturing NYSE: TSM come into play for savvy investors who want to avoid other hyped-up names that operate near the bottom of the value chain. As a primary chipmaker and equipment provider, Taiwan Semiconductor’s positioning at the top of the value chain enables it to receive payment before these other companies, and this theme is reflected in the company’s earnings themselves.

Taiwan Semiconductor’s Business Is Running Hot

Starting with the top line, Taiwan Semiconductor’s latest quarterly earnings show investors a net revenue growth of up to 44% over the past year, which should erase most (if not all) of the fears currently present for the industry as President Trump keeps ramping up a tariff placement for China and other heavy semiconductor buyers.

This significant revenue growth indicates that the industry itself isn’t slowing down, and that Taiwan Semiconductor is not affected by the macroeconomic backdrop. If anything, it suggests that its leadership position has been maintained.

Here is what really matters for the future. However, Taiwan Semiconductor’s revenue was mostly focused on its 7nm and below wafers, which are currently being used to develop the latest artificial intelligence chips and data centers, considering they have the most computing power.

Up to 74% of revenue came from these products, indicating little to no competition among other companies that depend on Taiwan Semiconductor as their primary supplier. This positioning, of course, translates to a high gross profit margin of up to 57.5% and net income growth of as much as 60.7% over the year.

Knowing that earnings per share (EPS) drive most stock returns, investors shouldn’t be surprised to see the stock now trade at up to 96% of its 52-week high, an area where Taiwan Semiconductor could also be flirting with making a new all-time high.

Even with all of this new demand from customers like NVIDIA Co. NASDAQ: NVDA and Apple Inc. NASDAQ: AAPL, Taiwan Semiconductor’s management felt confident enough that guidance should be raised for future quarters and the end of 2025 as a fiscal year, which is where the benefit of being a $1 trillion company comes in as an ability to pivot.

Markets React to Results

Over the past month, up to 22.2% of Taiwan Semiconductor’s short interest was wiped out from the balance, showing every investor a clear sign of bearish capitulation. The fact is that, as these financial results continue to show resilient momentum and growth, this company will also continue to create a higher ceiling for itself.

Investors can also see this happening as Charles Shi from Needham & Company reiterated his Buy rating on Taiwan Semiconductor stock, this time also boosting his valuation target to $270 per share. This call would not only imply the company can break into a new 52-week high, but also deliver an additional 14% upside from today’s prices.

Another factor investors should keep in mind is what the so-called “smart money” is doing with Taiwan Semiconductor stock, and the answer boils down to one word: buying. Momentum and fundamental-driven money managers are having a blast seeing what this company is doing, which is why a new buyer came in the day after earnings were released.

Those from Ninety One UK Ltd decided to boost their holdings in Taiwan Semiconductor stock by 1.2% as of July 2025. While this may not sound like much on a percentage basis, this new allocation brought their position to a new high of $454.3 million today, also acting as another vote of confidence for the stock's future.

Chances are that, as the company continues to dominate the artificial intelligence boom and the entire industry, better earnings and financials will be reported, leading to new highs in the stock price and triggering increased institutional buying pressure to initiate a virtuous cycle for shareholders.