Taiwan Semiconductor

TSMC makes the chips for virtually every AI leader including Nvidia, AMD, Google, and Amazon. AI chip revenue is growing over 55 percent annually, and Nvidia recently overtook Apple as their biggest customer. When the world's smartest companies need cutting-edge processors, TSMC is the only game in town with over 70 percent market share in advanced chips.

Revenue hit a record 122 billion dollars in 2025, up 36 percent year over year. Gross margins broke through 60 percent for the first time while operating margins topped 50 percent. The company sits on nearly 100 billion dollars in cash and keeps getting more profitable as AI demand pushes prices higher.

Taiwan sits just 100 miles from mainland China, and recent conflicts in the Middle East have revived fears about what could happen if tensions escalate. Any military action near Taiwan could disrupt the world's most critical chip supply. This geopolitical risk keeps the stock cheaper than other AI plays despite superior fundamentals.

TSMC plans to spend over 50 billion dollars annually building new factories in Arizona and Taiwan, with a total commitment of 165 billion dollars in the US alone. Higher fixed costs mean any slowdown in AI demand would hit profits harder. New overseas factories may also run lower margins initially as they ramp up production.