We recently compiled a list of the top 10 best tech stocks for long-term investing. In this article, we’ll take a look at how Taiwan Semiconductor Manufacturing Co., Ltd. (NYSE:TSM) stands compared to other tech stocks.
In a recent conversation on Dec. 3, Liontrust Asset Management’s Claire Pleydell Bouverie appeared on CNBC to share insight into the state of innovation, particularly in Silicon Valley. He emphasized that the pace of innovation is not only continuing, but accelerating. This rapid evolution requires frequent visits to the region to determine which companies are successfully navigating this transition and which are not. Pleydel-Bouberi noted that clarity regarding these companies has improved every quarter. She expressed a firm belief that the beneficiaries of the new technology cycle that began about 18 months to two years ago with the advent of ChatGPT and the AI revolution will be very different from the beneficiaries of previous technology cycles. While established names remain important, she is increasingly focused on opportunities beyond MAG7.
The discussion also touched on market trends for 2025 and highlighted the key focus on AI infrastructure. Pleydell-Bouverie said the company has been focused this year on building out the necessary computing infrastructure before monetization. This infrastructure includes not only silicon but also semiconductor equipment and network components essential to expanding AI capabilities. She noted that although model providers are often seen as commoditized, there is an arms race underway to develop basic models at scale. While engineering tools that facilitate the integration of AI into business and various applications are also important, most of the value currently resides in the AI infrastructure layer.
Pleydel-Bouberi predicts that the focus will shift to the application layer, which is expected to be significantly disrupted. Many AI startups are targeting established players like Salesforce, indicating a competitive landscape. Despite this change, she believes NVIDIA’s importance in AI infrastructure remains strong. She described the role as critical, suggesting it will be the operating system for a new landscape of AI-infused software expected to be launched next year. Pleydell-Bouverie cautioned against viewing the company as just a chip provider. Rather, she argued that it is important for investors to understand their strategic positioning within this technology paradigm shift.
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Her insights reflect a broader story about the transformation underway in Silicon Valley and its impact on investors seeking to effectively navigate this rapidly evolving technology landscape. With the popularity of tech stocks on the rise, here’s a list of the top 10 tech stocks that are best for long-term investing.
methodology
We first scoured stock screeners and internet lists to create a list of the top mega-cap tech stocks. We then selected the 10 stocks that are most popular among elite hedge funds and that analysts are bullish on. Stocks are ranked by the number of hedge funds that own the stock as of Q3 2024. Hedge fund data comes from Insider Monkey’s database, which tracks the movements of more than 900 elite money managers.
Why are we interested in stocks that hedge funds invest in? The reason is simple. Our research shows that by mimicking the top stock picks of the best hedge funds, you can outperform the market. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, outperforming the benchmark by 150 percentage points (Learn more ).
Is TSM stock a good long-term buy?
Close-up of a complex network of integrated circuits used in logic semiconductors.
Number of hedge fund holders: 158
Taiwan Semiconductor (NYSE:TSM) is one of the world’s leading chip manufacturers, producing advanced chips for leading technology companies. Strong demand for high-performance computing, AI, and 5G technologies are driving growth. Our cutting-edge technology, especially in the production of 3nm, 5nm and 7nm chips, gives us a strong competitive advantage.
The company is also expected to dominate the semiconductor industry with 2nm chip technology. This creates a significant barrier to entry for competitors, effectively securing a near-monopoly position in the high-demand chip. Upcoming 2nm (N2) chips featuring gate-all-around (GAA) transistor architecture represent a breakthrough. GAA transistors offer superior power efficiency and performance compared to current FinFET technology, which is critical to meeting the demands of high-performance computing. N2 promises 10-15% performance improvement and 25-30% power consumption reduction at the same power level compared to the previous generation (N3E). Additionally, N2 increases transistor density by 15%, allowing for more powerful chips in smaller packages.
This advancement is expected to drive innovation in areas as diverse as AI, mobile devices, and data centers, reshaping the computing technology landscape. Taiwan Semiconductor (NYSE:TSM) is also expanding its manufacturing capacity through significant investments in new manufacturing plants, further strengthening its market position.
Baron Global Advantage Fund said the following about Taiwan Semiconductor Manufacturing Co., Ltd. (NYSE:TSM) in its Q3 2024 investor letter:
“We established a small position in Taiwan Semiconductor Manufacturing Co., Ltd. (NYSE:TSM). Morris Chang founded TSMC in 1987 as the world’s first dedicated semiconductor foundry. were always designed and manufactured by the same company, and TSMC introduced a revolutionary new business model that operated purely as a contract manufacturer. continues to focus on improving manufacturing process technology, enabling the emergence of innovative fabless design companies such as NVIDIA, Apple, and Qualcomm, which have become TSMC’s primary customers in the semiconductor foundry market. It has a market share of more than 60% overall, and a market share of more than 90% in the cutting-edge manufacturing field. TSMC faces high barriers to entry as the cost and technical complexity of semiconductor manufacturing continues to rise, but benefits from economies of scope as cutting-edge manufacturing becomes a latecomer in depreciated equipment. TSMC also benefits from scale: increased profits lead to increased R&D and capital expenditures, allowing for further technological differentiation, resulting in higher profits. We believe that TSMC will maintain strong double-digit revenue growth over the next few years due to continued market share gains, strong pricing power, and structural growth in AI demand. According to We predict that revenue from chips will increase rapidly. It is expected to grow at a CAGR of 50% from 2022 to 2028, accounting for over 20% of TSMC’s revenue by 2028. The eventual proliferation of edge AI devices, such as AI smartphones and AI PCs, will require significantly more computing power and will inevitably further increase the demand for TSMC’s cutting-edge technology. ”
Overall, TSM ranks 7th on our list of best tech stocks for long-term investing. We recognize TSM’s potential as an investment and believe that AI stocks have great potential for high returns in the short term. If you’re looking for AI stocks that are more promising than TSM but are trading at less than 5x earnings, check out our report on the cheapest AI stocks.
Read next: BlackRock’s 8 Best Widemot Stocks to Buy Now and 30 Most Important AI Stocks.
Disclosure: None. This article was originally published on Insider Monkey.
