Data Center Spending Is Set to Surge 32% This Year. Here's My Top Stock to Buy

Core Insights - Data center spending by major tech companies is projected to grow nearly 32% to $650 billion, indicating a significant opportunity in the AI hardware market [1] - Semiconductors are essential for all computing devices, making them a critical investment focus in the tech industry [2] Company Overview - Taiwan Semiconductor Manufacturing Company (TSMC) is a leading player in the semiconductor industry, dominating the foundry market with a 72% market share [6] - TSMC's major clients include Apple and Nvidia, with the latter's Blackwell chips being manufactured at TSMC's Arizona facility [5] Financial Performance - In Q4 2025, TSMC reported net revenue of $33.75 billion, a 25.5% increase year-over-year, with earnings per share climbing 35% [8] - The company's gross margin increased by 3.3 points to 62.3%, and its operating margin grew by 5 points to 54% [9] Revenue Sources - 77% of TSMC's revenue comes from advanced chips (7 nanometers or smaller), which are crucial for AI applications [9] - The high-power computing segment, including AI chips, is the fastest-growing revenue source, up 48% and accounting for 58% of TSMC's revenue in 2025 [10] Expansion Plans - TSMC is set to invest $100 billion to expand its manufacturing facilities in the U.S. as part of a trade deal with Taiwan [7] - The company has cash and cash equivalents totaling $97 billion, with total liabilities of $78.2 billion, indicating strong financial health [11]