<div id="readability-page-1"><p><strong>Taiwan Semiconductor Manufacturing</strong> <span>(TSM<span> 0.24%</span>)</span> may not design artificial intelligence (AI) chips, but it's a company that every AI chipmaker relies on. The AI giants rely on TSMC to manufacture their number-crunching chip designs. That's why TSMC is the safest long-term play in the AI infrastructure space.</p> <p>Let's look at what makes the company so special.</p>  <h2>The foundry leader</h2> <p>TSMC is the world's most advanced semiconductor foundry, and it counts the world's leading chip designers among its top customers, including <strong>Nvidia</strong>, <strong>Advanced Micro Devices</strong>, <strong>Broadcom</strong>, and <strong>Apple</strong>. It has the scale and technological leadership that rivals can't match. <strong>Intel</strong> has been burning cash trying to establish its foundry business, while Samsung's yield issues continue to be an issue. That has given TSMC a huge market share lead in the advanced node market, and it's not particularly close. </p> <p>Nodes refer to the size of the transistors used on a chip, measured in nanometers. The smaller the node, the more transistors can be packed onto the chip, which boosts performance and power efficiency. Smaller nodes are becoming a bigger part of TSMC's mix. Chips made on 7nm and smaller nodes made up 73% of its revenue in the first quarter, up from 65% a year ago. Its 3nm node accounted for 22% of revenue, and Apple has booked much of its 2nm supply for future products. Even Intel has been using TSMC's 3nm tech for some of its most advanced chips. That says a lot. </p>  <p>TSMC's clear leadership in the space has also given the company strong pricing power. Between increasing demand and higher prices, this is driving both strong revenue growth and improved gross margins. Last quarter, its revenue jumped 35% to $25.5 billion, led by growth in high-performance computing (HPC). That continued in Q2, with the company reporting preliminary revenue growth of 39% to $31.9 billion, as estimated by Reuters. </p>  <p>Margins remain strong despite new fabs ramping. Gross margin rose 190 basis points to 58.8% in Q1 despite its Arizona and Japan fabs still ramping up and weighing on profitability. TSMC expects these newer facilities to dilute margins by 2 to 3 percentage points this year, but the company is already raising prices to offset the pressure. According to reports, TSMC will increase AI chip prices this year, with Arizona-made chips potentially commanding a 30% premium. </p> <h2>TSMC's business risks</h2> <p>TSMC is not entirely without risks. Geopolitical tensions around Taiwan will always be part of the story, and it's not immune to tariffs and policy shifts in the U.S. However, TSMC is already addressing both by expanding its footprint globally. The company has been building new fabs in the U.S., Japan, and Europe in partnership with its largest customers.</p> <p>However, what makes TSMC the safest AI semiconductor stock is its position in the semiconductor value chain. It ultimately doesn't matter which company wins the AI chip race. TSMC's success is tied to overall AI chip demand, not any one company's products.</p> <p>AI chip demand isn't slowing down, either. TSMC previously projected AI-related revenue to grow at a mid-40% compounded average growth rate (CAGR) over the next five years, starting in 2024. It's also working closely with customers to time its capacity expansion accordingly. With its top customers booking future supply, it has solid visibility into future growth. </p>  <p>Meanwhile, it could see a tailwind beyond AI with autonomous driving. Robotaxis are beginning to take off and gain traction, and all of those vehicles will need to be fitted with advanced chips. It's still early, but if robotaxis and autonomous driving become commonplace, TSMC will be a big beneficiary.</p> <div><p><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MjQ3Nzgvc2VtaWNvbmR1Y3Rvci13YWZlci1wcm9kdWN0aW9uLTE4MDIyODUxMDkuanBnJnc9NzAw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="420" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MjQ3Nzgvc2VtaWNvbmR1Y3Rvci13YWZlci1wcm9kdWN0aW9uLTE4MDIyODUxMDkuanBnJnc9NzAw"/></p><p>A semiconductor wafer being manufactured.</p> </div> <h2>Time to buy the stock</h2> <p>In the AI chip battle, TSMC is essentially the AI arms dealer. It doesn't need to bet on who will dominate the chip market, because it sells manufacturing services to all of them. For investors who want exposure to AI semiconductors without betting on a single chipmaker, TSMC is the safest way to play it.</p> <p>The stock is also attractively valued, trading at a forward price-to-earnings (P/E) ratio of 24 times based on analysts' 2025 estimates and a price/earnings-to-growth ratio (PEG) of less than 0.7. Stocks with PEG ratios below 1 are typically considered undervalued.</p> <p>Taken all together, TSMC is one of the best and safest stocks to buy in the semiconductor space right now.</p>                                                                            </div>

SOXL

<p>Taiwan Semiconductor Manufacturing Company (TSMC) is highlighted as a leading player in the AI chip market, despite not designing chips itself. TSMC's advanced manufacturing capabilities and strong customer base, including Nvidia and Apple, position it as a safe long-term investment in AI infrastructure. The company has seen significant revenue growth, with a projected mid-40% CAGR in AI-related revenue over the next five years. TSMC's stock is considered attractively valued, making it a recommended buy for investors seeking exposure to the semiconductor sector without betting on individual chipmakers.</p>

- Taiwan Semiconductor Manufacturing Company (TSMC) is a key player in the AI chip market, providing manufacturing services to major chip designers like Nvidia and Apple.  
- TSMC's advanced technology and market share in smaller nodes have led to significant revenue growth, with a projected mid-40% CAGR in AI-related revenue over the next five years.  
- Despite geopolitical risks, TSMC's global expansion and strong pricing power position it as a safe investment in the semiconductor industry.

Prediction: Taiwan Semiconductor Manufacturing Stock Is the Safest AI Chip Bet