Choosing one stock to maintain in a portfolio over the long term is no simple decision and generally is not advised as a singular investment approach. Nonetheless, evaluating this question can help investors clarify which companies they most trust to succeed over time and align their broader investment strategy accordingly. For those reasons, Taiwan Semiconductor Manufacturing Company (NYSE: TSM) emerges as a highly attractive option given its solid positioning in the evolving market landscape and minimal threat from disruption.
TSMC is currently benefiting from the rapid escalation in artificial intelligence (AI) infrastructure spending. Corporations are heavily investing billions into building and expanding data centers to accommodate surging computational demand. A central bottleneck in meeting this demand lies in securing sufficient computing power, traditionally supported by graphics processing units (GPUs), where Nvidia has been the leading supplier. However, TSMC’s unique role as the primary semiconductor foundry for a broad array of computing chips increases its strategic advantage.
Unlike companies focused on a narrow product set, TSMC manufactures wafers for the majority of chips powering modern computing devices, including those essential for AI applications. Its unparalleled scale in production capacity and superior technology node development provide it with a leading edge compared to competitors. As a relatively impartial player amid the AI race, TSMC stands to gain significantly as data center capital expenditures continue their upward trajectory.
Investor skepticism is understandable around projections from AI chip developers like Nvidia, whose recent forecasts anticipate global data center capital expenditures soaring to $3 trillion to $4 trillion by 2030, a substantial increase from an expected $600 billion in 2025. Nonetheless, Nvidia’s insider insights lend credence to these dynamics, and TSMC, as a critical chip fabricator, is positioned to serve this burgeoning market demand.
TSMC is also at the forefront of technological advancement, with its forthcoming 2-nanometer (nm) chip generation currently entering production. This new technology addresses crucial industry challenges, particularly in energy efficiency, which is key amid constrained power availability for AI infrastructure. The 2nm chips consume 25% to 30% less power than the preceding 3nm models while maintaining equivalent operating speeds. This advancement ensures TSMC’s hardware not only supports AI performance needs but does so sustainably, which is vital for hyperscalers and data center operators planning extensive build-outs.
From a valuation perspective, TSMC’s stock trades at a forward price-to-earnings ratio of approximately 23 times estimated 2026 earnings. This valuation is comparatively moderate relative to many AI-focused technology companies, some of which carry significantly higher premiums. Considering TSMC’s anticipated ongoing growth beyond 2026, the current pricing offers investors a reasonable entry point for participation in its expansion.
Maintaining a leadership position in semiconductor manufacturing, driven by continuous innovation and scale, places TSMC in a prime situation to capitalize on the accelerated AI-driven demand cycle. Fundamentally, its chips power numerous devices integral to generative AI workloads today, making it indispensable for the technology ecosystem’s forward march. Provided the company sustains its innovation pace, it is well-positioned to outperform the market in the near to mid-term horizon.
In summary, TSMC combines strategic advantages in market exposure, manufacturing capacity, technology improvements, and valuation that collectively support its standing as a top stock to hold through evolving market cycles driven by artificial intelligence growth.