Rare Investment: Taiwan Semiconductor in AI Boom

Published Date : 30/10/2025 

Taiwan Semiconductor is positioned to benefit from the growing demand for AI chips, with its innovative 2nm technology set to drive increased demand and profitability. 

Taiwan Semiconductor manufactures microchips for nearly all the major AI components. This makes it a critical player in the rapidly evolving AI industry. The company has a new technology that could drive increased demand, making it a standout investment in the semiconductor sector.

The artificial intelligence (AI) race is really just getting started. While there have been substantial buildout announcements over the past month, these are just announcements. The actual building of data centers will occur over the next few years, so chip demand from companies like Nvidia hasn't reached peak capacity yet.

While Nvidia is still the leader in AI computing hardware, there are a few companies starting to challenge that notion. Advanced Micro Devices and Broadcom have been building strong momentum over the past few weeks, making investors question whether Nvidia is still the gold standard of AI investing.

While I think all three companies have merit, there's one stock that will benefit no matter who the perceived leader in AI computing is: Taiwan Semiconductor (NYSE: TSM). None of these companies can manufacture their own microchips, so they farm it out to foundries like TSMC. This makes Taiwan Semiconductor the ultimate neutral party to capitalize on this once-in-a-decade buildout opportunity, and I think it's an excellent stock to buy right now.

There aren't a ton of options for companies to use to have their chip designs manufactured. Among the few possibilities, Taiwan Semiconductor is by far the most popular option, having earned that title by offering innovative technology and strong manufacturing yields. As a result, Taiwan Semiconductor is the go-to company to have chips made, which is why it has captured the three dominant AI companies above, alongside other tech companies like Tesla and Apple.

Taiwan Semiconductor has always been innovative, and its latest product launch backs up that notion. While the current most powerful chip technology is 3nm (nanometer) chips, 2nm chips are entering production this quarter. While that may not sound like a huge jump, it is. These chips are incredibly energy-efficient, consuming 25% to 30% less power than the 3nm varieties when configured to run at the same speed. Since AI data center energy consumption is a huge focus right now, and could be a limiting factor in artificial intelligence proliferation in the future, Taiwan Semiconductor's pioneering of this incredible technology is a big deal.

This new technology could prompt its customers to design new computing hardware that harnesses the power of 2nm chips, which AI hyperscalers will buy because they can deliver higher computing capacity with less energy consumption. The upgrade from a 2nm to a 3nm won't be cheap, and this will drive increased revenue on top of rising chip demand in general. 

Frequently Asked Questions (FAQS): 

Q: What makes Taiwan Semiconductor a leader in the semiconductor industry?

A: Taiwan Semiconductor is a leader in the semiconductor industry due to its innovative technology and strong manufacturing yields. It is the go-to company for chip manufacturing, serving major tech companies like Nvidia, AMD, and Apple.

Q: What is the significance of 2nm technology in the AI industry?

A: 2nm technology is significant in the AI industry because it is more energy-efficient, consuming 25% to 30% less power than 3nm chips. This makes it highly attractive for AI data centers, which require significant energy consumption.

Q: How will the new 2nm technology impact chip demand?

A: The new 2nm technology will likely drive increased chip demand as AI hyperscalers look to upgrade to more energy-efficient and powerful computing hardware. This will also increase Taiwan Semiconductor's revenue.

Q: Why is Taiwan Semiconductor considered a neutral party in the AI computing race?

A: Taiwan Semiconductor is considered a neutral party in the AI computing race because it manufactures chips for multiple leading AI companies, including Nvidia, AMD, and Broadcom. This makes it a valuable investment regardless of which company becomes the AI leader.

Q: What are the potential challenges in the AI data center industry?

A: One of the potential challenges in the AI data center industry is energy consumption. As AI becomes more prevalent, the energy required to power data centers could become a limiting factor. Innovations like 2nm technology help address this issue. 

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