TSMC: The AI Stock Quietly Crushing Nvidia in 2025
Source: fool.com
Nvidia has been the undisputed champion of the AI boom, but one key partner is actually seeing even bigger gains. That company is Taiwan Semiconductor Manufacturing (TSMC), whose stock is up 45% this year, surpassing Nvidia's impressive 41% rise.
Nvidia's Reign and TSMC's Essential Role
Nvidia's GPUs are the engines driving today's AI revolution. The company's stock has skyrocketed nearly 1,500% in three years, giving it a market capitalization of $4.6 trillion. But Nvidia's success relies heavily on TSMC, the world's largest semiconductor manufacturer.
TSMC's Dominance in Chip Fabrication
TSMC doesn't design chips. Instead, it builds them for Nvidia and other tech giants like Broadcom, AMD, Apple, and Tesla. TSMC's stock is not only outperforming Nvidia but also boasts more attractive valuation ratios.
CEO Huang's Praise and Technological Prowess
Nvidia CEO Jensen Huang has lauded TSMC as a world-class foundry, emphasizing its crucial support for diverse customer needs. TSMC leads in manufacturing advanced 3-nanometer and 5-nanometer chips, essential for increasing the power and efficiency of semiconductors.
Impact on Smartphones and 5G Technology
These chips are not just for AI; TSMC also produces semiconductors for smartphones, enabling widespread 5G communication. This technology offers users broadband internet speeds on mobile devices, which supports high-resolution streaming and remote work capabilities.
Financial Growth and Strategic Expansion
TSMC's second-quarter revenue reached $30.07 billion, a 44.4% increase year-over-year, with a net profit margin of 42.7%. Projections indicate even stronger revenue in the next quarter, between $31.8 billion and $33 billion. TSMC is investing $165 billion in new fabrication plants in Arizona, a strategic move to mitigate economic risks and align with U.S. efforts to boost domestic manufacturing.
Market Leadership and Future Opportunities
With a 70% market share in the foundry market, TSMC possesses a significant competitive advantage. As the semiconductor industry approaches a $1 trillion valuation by 2030, TSMC is positioned for massive growth. The company also offers a dividend, a rarity among AI-related stocks, providing a 1.2% yield.
A Powerful Partnership
TSMC is a more affordable stock than Nvidia and a vital player in the AI and semiconductor sectors. Investing in both TSMC and Nvidia could create a robust AI portfolio. Together, they form a formidable partnership, driving innovation and growth in the tech industry.