TSMC: The Unsung Hero Quietly Outperforming Nvidia in the AI Boom

Nvidia is a Wall Street darling thanks to its AI-powering GPUs, but one company is performing even better this year: Taiwan Semiconductor Manufacturing (TSMC). The company's stock is up 45% so far in 2025, beating Nvidia's impressive 41% gain.

TSMC: The Foundation of AI

TSMC doesn't design chips. Instead, it manufactures them for Nvidia, Apple, AMD, and Tesla. Nvidia's CEO, Jensen Huang, has lauded TSMC as a world-class foundry essential to the industry.

Dominating Chip Fabrication

The company's primary business is producing advanced 3-nanometer and 5-nanometer chips, generating 60% of its revenue. TSMC is among the few companies capable of mass-producing these sought-after chips, critical for increasing the power of devices.

Expanding Capabilities and Reach

TSMC plans to mass-produce its 2nm process this year. The company also makes semiconductors for smartphones, enabling 5G, plus devices for IoT, electric vehicles, and more.

Financials and Expansion

Revenue in the second quarter reached $30.07 billion, a 44.4% increase year-over-year. Net profit margins were a strong 42.7%. TSMC projects even higher revenue for the next quarter, between $31.8 billion and $33 billion.

Strategic Investments in the US

TSMC is investing $165 billion in fabrication plants in Arizona. This move aims to protect the company from tariffs while supporting the U.S. government's push to bring manufacturing back to America.

A Solid Investment Choice

TSMC holds a 70% market share in the foundry market, according to TrendForce. The semiconductor industry is projected to reach $1 trillion annually by 2030, presenting a huge opportunity.

Dividend and Portfolio Strategy

TSMC offers a 1.2% dividend yield, a bonus not often found in AI stocks. While TSMC is a cheaper stock than Nvidia, investing in both could create a powerful AI portfolio.