Every decade, a new investment trend seems to emerge. While some of these trends have real momentum behind them, others fizzle out before making a huge impact. There is no denying that the main investment theme of the past few years has been artificial intelligence (AI) investing. Billions and even trillions of dollars have been spent on computing hardware to support AI workloads. By 2030, NVIDIA Annual data center spending is expected to be $3 trillion to $4 trillion.
This is a huge opportunity and there are many ways to take advantage of it as an investor. One of my best investment ideas in this space is TSMC (NYSE:TSM). The company is at the heart of the AI movement because nearly every computing unit deployed for AI workloads uses chips from its factories. This makes it a neutral way to conduct the AI arms race, since it doesn’t matter which computing units are deployed; chances are, it’s filled with TSMC chips.
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I believe its stock will soar over the next few years, and if you don’t already own shares, it’s not too late to buy now.
TSMC makes logic chips, which are critical to the various artificial intelligence computing units on the market today. There are also only a handful of competitors in this space, mainly because it has a huge lead in capacity and floor space. The company has served its customers well over the past decade and there’s no reason to give up.
One of the concerns some investors and customers may have is its location. The island of Taiwan is located near mainland China, and there are rumors that China is willing to take military action to bring Taiwan under tighter control. If something like this happens, stocks will definitely plummet, but it won’t be as bad as it was a few years ago.
TSMC has spent heavily to build chip production facilities in other parts of the world, including Arizona, Germany and Japan. In fact, Nvidia’s flagship GPU Blackwell uses entirely chips produced in the United States. While this is still a significant risk, I don’t think investors need to worry as much as they once did.
When it comes to artificial intelligence chips, TSMC management expects staggering growth in the coming years. By 2029, AI chip revenue is expected to grow at a compound annual growth rate (CAGR) of nearly 60%. That’s an incredible growth rate and confirms Nvidia’s prediction that there is a $3 trillion to $4 trillion annual market opportunity in artificial intelligence. However, TSMC isn’t all about AI; It also has other uses, such as chips used in smartphones.
