Will Healy, Justin Pope, and Jake Lerch, The Motley Fool
6 min read
In This Article:
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Nvidia recently set a new all-time high, but there could still be upside ahead.
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Rising chip demand and a low valuation bode well for TSMC.
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Analysts expect AMD's sales to increase 23% in 2025.
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10 stocks we like better than Taiwan Semiconductor Manufacturing ›
Many artificial intelligence (AI) stocks have had a rough start in 2025. Developments such as DeepSeek's breakthrough in low-cost AI modeling, as well as tariff and geopolitical concerns, weighed on these stocks.
Interestingly, President Donald Trump's "Liberation Day" announcement signaled a low for many AI stocks, so much so that some of them have eked out a net gain for the year to date. Additionally, some AI stocks are poised to continue moving higher, and the three stocks below should continue to surge despite recent gains.
Will Healy (Taiwan Semiconductor Manufacturing): Chip manufacturer Taiwan Semiconductor Manufacturing (TSMC) (NYSE: TSM) finds itself at the center of its industry and the geopolitical turmoil that has weighed on many AI stocks.
TSMC claims just over two-thirds of the foundry market, and top chip companies such as Nvidia (NASDAQ: NVDA), Apple, and Broadcom are among its customers.
Moreover, China is a critical customer of many of its clients. Still, that country remains an ongoing threat to the sovereignty of Taiwan, which is home to TSMC's headquarters and the majority of its chip production capacity. That weighed on the stock as trade-war tensions came to a head in early April.
Despite that drop, the stock has staged a dramatic recovery since then, so much so that it is now up 14% so far this year.
Furthermore, TSMC's revenue growth and valuation could mean the stock is at the beginning of a bull market. As customers scramble to adopt generative AI, demand for AI chips has skyrocketed. In the first quarter of 2025, revenue of $25.5 billion increased 42% from year-ago levels. Also, since TSMC kept operating expense growth in check, its net income surged 60% higher to $11 billion.
Additionally, the company forecasts second-quarter revenue between $28.4 billion and $29.2 billion, amounting to 38% growth at the midpoint, indicating that its massive growth is on track to continue.
Amid the fears of a takeover, TSMC sells at a P/E ratio of 29. Although investors should not dismiss such worries, China's dependence on the company's chips reduces the likelihood of such a geopolitical event.
It also probably means the stock is a bargain, and as rising chip demand continues to drive revenue, TSMC stock is likely to rise along with that trend.
