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

Source: finance.yahoo.com

Published on October 7, 2025 at 05:13 PM

Nvidia has dominated headlines with its AI-powering chips. However, another key player, Taiwan Semiconductor Manufacturing (TSMC), is quietly outperforming it this year. TSMC's stock is up 45% so far in 2025, exceeding Nvidia's 41% gain.

TSMC's Foundational Role

TSMC doesn't design chips. Instead, it manufactures them for giants like Nvidia, Apple, and AMD. This makes TSMC indispensable to the entire tech industry. Nvidia's CEO has praised TSMC as a world-class foundry that supports diverse customer needs.

TSMC's dominance comes from its advanced manufacturing capabilities. It leads in producing cutting-edge 3-nanometer and 5-nanometer chips, essential for powerful devices. These chips are used in smartphones, enabling 5G technology. They are also vital for electric vehicles and IoT devices. The company plans to begin mass production of 2nm process chips this year.

Financial Performance and Expansion

TSMC's Q2 revenue reached $30.07 billion, a 44.4% increase year-over-year, boasting a 42.7% net profit margin. The company expects even higher revenue in the next quarter, projecting between $31.8 billion and $33 billion.

To further solidify its position, TSMC is investing $165 billion in new fabrication plants in Arizona. This move aims to mitigate risks associated with tariffs and promote U.S.-based manufacturing.

Market Dominance and Future Growth

TSMC commands a 70% market share in the foundry market. The semiconductor industry, valued at $600 billion, is projected to reach $1 trillion by 2030. This indicates a massive growth opportunity for TSMC.

Investment Considerations

TSMC offers a 1.2% dividend yield, a rarity among AI-related stocks. While not a huge payout, it's better than Nvidia's minimal dividend. TSMC is cheaper than Nvidia and essential to the semiconductor and AI sectors.

Considering its crucial role and growth potential, TSMC is a compelling investment choice. Pairing TSMC with Nvidia could create a robust AI-focused portfolio.