Forget Nvidia? This AI Chip Stock Is Crushing It in 2025

Nvidia has been the undisputed champion of the AI boom. However, one key player is quietly outperforming the graphics processing giant this year: Taiwan Semiconductor Manufacturing.

TSMC's Impressive Gains

Taiwan Semiconductor Manufacturing (TSMC) doesn't design chips. Instead, they build them for tech titans like Nvidia, Apple, and Tesla. TSMC stock is up 45% this year, exceeding Nvidia's 41% gain and reaching a new high.

TSMC also boasts more attractive valuation ratios than Nvidia. Even Nvidia's CEO Jensen Huang acknowledges TSMC's crucial role, calling them a world-class foundry.

The Power of 3nm Chips

TSMC's forte is manufacturing cutting-edge 3-nanometer and 5nm chips, accounting for 60% of its revenue. Their ability to mass-produce these advanced chips is a major advantage.

Smaller transistors mean companies can pack more power into their products. TSMC plans to begin mass production of its 2nm process this year.

Beyond AI: Diverse Applications

TSMC's semiconductors power more than just AI. They're essential for smartphones, enabling 5G communication and fast internet access on mobile devices.

They also produce chips for smart home devices, wearable tech, electric vehicles, and advanced driver-assistance systems.

Financial Strength and Expansion

In the second quarter, TSMC's revenue jumped 44.4% year-over-year to $30.07 billion, with a remarkable 42.7% net profit margin. The next quarter's projections are even higher, forecasting revenue between $31.8 billion and $33 billion.

TSMC is investing $165 billion to expand its fabrication plants in Arizona. This move helps protect the company from potential tariffs and supports the U.S. push to bring manufacturing back home.

Why TSMC is a Top Pick

TSMC dominates the foundry market with a 70% share. This gives them a significant advantage. The semiconductor industry is projected to reach $1 trillion by 2030, presenting a massive opportunity for TSMC.

Unlike many AI stocks, TSMC also offers a dividend. Its 1.2% yield and $3.34 per share payout is a bonus for investors.

The Verdict

TSMC is a more affordable stock than Nvidia. It’s absolutely vital to the semiconductor and AI industries. Ideally, consider investing in both companies to capitalize on the AI revolution.