TSMC: The AI Stock Quietly Crushing Nvidia's Returns in 2025

While Nvidia grabs headlines, another company is quietly dominating the AI landscape. Taiwan Semiconductor Manufacturing (TSMC) is outperforming even the mighty Nvidia this year. Let's explore why TSMC is a crucial player in the AI boom.

Nvidia's Reign and TSMC's Rise

Nvidia's GPUs power AI and large language models, rocketing its stock nearly 1,500% in three years. With a $4.6 trillion market cap, Nvidia seems unstoppable, but TSMC is close behind. TSMC's stock is up 45% this year, surpassing Nvidia's 41% gain and reaching an all-time high.

TSMC: The Unsung Hero of Chipmaking

TSMC doesn't design chips; it builds them for giants like Nvidia, Broadcom, and Apple. Its price-to-earnings and price-to-sales ratios are more attractive than Nvidia's. Even Nvidia's CEO acknowledges TSMC's importance, calling it a "world-class foundry."

The Magic of Nanometers

TSMC specializes in making advanced 3-nanometer and 5nm chips. These chips account for 60% of its revenue. Only a few companies can mass-produce these sought-after 3nm chips. Smaller transistors mean more power for companies like Tesla and Nvidia.

Beyond AI: TSMC's Diverse Reach

TSMC makes semiconductors for smartphones, enabling 5G communication. This tech allows users to stream high-resolution video and work remotely. The company also produces chips for IoT devices, electric vehicles, and driver assistance programs.

Stellar Financial Performance

Second-quarter revenue hit $30.07 billion, a 44.4% jump from last year, with a 42.7% net profit margin. TSMC projects even better numbers for the next quarter, with revenue between $31.8 billion and $33 billion.

Investing in Expansion

TSMC is investing $165 billion in new fabrication plants in Arizona. This move aims to protect TSMC from tariffs and supports the U.S. push to bring manufacturing back home.

Why TSMC Is a Strong Buy

TSMC holds a 70% market share in the foundry market, creating a significant competitive advantage. The semiconductor industry is projected to reach $1 trillion by 2030. This offers a huge market opportunity for TSMC.

The Dividend Advantage

TSMC offers a 1.2% dividend yield, a bonus not often found in AI stocks. It pays out $3.34 per share, much better than Nvidia's skimpy $0.04. TSMC is essential to both the semiconductor and AI industries. Consider investing in both TSMC and Nvidia to create an unstoppable AI-powered portfolio.