1 Artificial Intelligence (AI) Winner Hiding in Plain Sight for 2026

Core Viewpoint - TSMC is positioned as a leading AI stock due to its significant growth in the AI chip market, with a share price increase of over 170% in the past five years, driven by demand from major AI chipmakers [1] Group 1: Company Overview - TSMC is the world's largest and most advanced contract chipmaker, manufacturing the smallest, densest, and most power-efficient chips [2] - Major "fabless" chipmakers, including Nvidia, AMD, Broadcom, and Apple, rely on TSMC for their advanced chip production [2] Group 2: Financial Performance - In 2025, TSMC's revenue increased by 36% in USD terms, primarily driven by high-performance computing (HPC) chips, with HPC revenue surging 48% and accounting for 58% of total revenue [3] - TSMC's gross and operating margins expanded, indicating strong pricing power, with EPS increasing by 46% [4] - For 2026, TSMC anticipates a revenue rise of nearly 30% in USD terms, supported by the ongoing AI boom [4] Group 3: Growth Projections - From 2024 to 2029, TSMC expects a compound annual growth rate (CAGR) approaching 25% in USD terms, with a projected gross margin above 56% throughout this period [5] Group 4: Near-term Catalysts - Major tech companies, including Microsoft and Meta, plan to significantly increase AI infrastructure spending in 2026 and beyond, leading to higher demand for AI chips produced by TSMC [6] - TSMC aims to maintain its technological lead by ramping up production of its smallest 2nm chips in the second half of 2026 [6] - The company is expanding its overseas plants in Japan, the U.S., and Europe to mitigate risks associated with potential military conflicts between Taiwan and China [7]