We recently compiled a list of 20 trending AI stocks based on the latest analyst ratings and news, and in this article we’ll take a look at how Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands relative to other trending AI stocks.
Artificial intelligence (AI) stocks have been hit hard in recent days, just weeks after a broad technology sell-off that rocked the financial industry. Shares of several prominent AI companies, including NVIDIA, fell by high single digits in just 24 hours. NVIDIA’s sell-off wiped nearly $300 billion from the company’s market cap. The growth-heavy NASDAQ Composite Index fell more than 3% in one day of trading. There’s no question that AI valuations are overinflated, and the recent bear market wiped nearly $1 trillion in value off AI companies in just a few hours.
For more on these trends, check out “The 33 Most Important AI Companies to Watch” and “20 Industrial Stocks Already Riding the AI Wave.”
The concerns around the leading AI chipmaker stem from recent reports that US authorities are growing uneasy about the company’s near monopoly in GPU supplies. The company’s strong share price in this regard has pleased investors. The company does business with major technology companies such as Google, Amazon, Microsoft and Meta. But it has drawn the ire of the Department of Justice, which is apparently in the process of sending a subpoena to the company in connection with an antitrust case, forcing it to provide certain information. Its acquisition in April of Run:ai, an Israeli company specializing in GPU orchestration software, is considered one of the points of contention between the AI chipmaker and the government.
Macroeconomic trends are also weighing on AI stocks in the near term. Commodity markets around the world are absorbing less-than-stellar growth rates from China, affecting the prices of copper and rare earth metals, which are widely used in AI devices, from chips to batteries. Recent U.S. manufacturing data also tells a less-than-good story for factories. Officials said U.S. manufacturing saw new orders fall further and inventories rise during August, even as overall manufacturing contracted at a moderate pace. These factors, plus new investment notes on AI from JPMorgan and BlackRock questioning the ROI for the surge in AI capital spending, have also attracted media attention.
For more on these developments, see “Billionaire Stan Druckenmiller Invests in AI Infrastructure, Tobacco, Industrial Stocks” and “10 Tech Stocks to Watch Amid Market Volatility, Bernstein Analysts Say.”
Our Methodology
In this article, we selected AI stocks based on the latest news and analyst ratings. These stocks are also popular among hedge funds. Why are we interested in stocks that hedge funds are flocking to? The reason is simple: our research shows that you can outperform the market by mimicking the top stocks of the best hedge funds. Our quarterly newsletter strategy selects 14 small and large stocks every quarter and has returned 275% since May 2014, beating the benchmark by 150 percentage points (more details here).
A close-up of the complex network of integrated circuits used in logic semiconductors.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of hedge fund holders: 156
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) manufactures and sells integrated circuits and semiconductors. It’s no secret that TSM has technological advantages over its rivals. Take the first Intel microprocessor, for example. It had about 2,000 transistors. Compare that to the latest TSM chips, which have over 200 billion transistors. This difference is what made the AI revolution possible. For comparison, to make an identical copy of one chip for an iPhone, one TSM factory needs to churn out over 1 quintillion transistors every few months. The scale of this chipmaker is unlike any other in the world.
Bernstein analyst Mark Lee rates Taiwan Semiconductor Manufacturing Co., Ltd. (NYSE:TSM) shares an Outperform and recently raised his price target from $150 to $200. He noted that the company’s data center AI revenue is growing as planned, but there is more data showing that AI is driving the smartphone upswing. The analyst added that EPS could grow another 26% in 2026 due to increased CoWoS, earlier Lunar Lake, and the potential for higher prices.
Overall, TSM ranks #13 on our list of trending AI stocks to buy. While we acknowledge TSM’s potential as an investment, we believe some AI stocks have the potential to deliver higher returns in a shorter time frame. If you’re looking for AI stocks that are more promising than TSM but still trade for less than 5x TSM’s earnings, check out our report on the cheapest AI stocks.
Read next: Michael Burry is selling these stocks and Jim Cramer is recommending these stocks.
Disclosures: None. This article was originally published on Insider Monkey.
