Taiwan Semiconductor (NYSE: TSM) is one of the most widely held AI chip stocks among elite hedge funds and billionaire investors, the latest 13F filings for the second quarter show.
Insider Monkey data shows TSM appeared in 250 hedge fund portfolios by the end of the second quarter, sharply up from 236 in the first quarter. Fisher Asset Management, run by Ken Fisher, is the largest holder with 18,866,198 shares worth $9,009,930,721, making up 2.68% of the fund’s portfolio. Fisher added 2% to the position last quarter. Coatue Management, run by Philippe Laffont, holds 8,914,995 shares worth $4,257,534,162, or 8.76% of the fund’s portfolio. Coatue trimmed the position by 4%. Tiger Global Management holds 4,881,008 shares of the company.
ARK Investment Management of Cathie Wood holds 482,286 shares worth $230,325,325, or 1.5% of the fund’s portfolio. ARK cut the position sharply, down 24%.
Third Point, run by Dan Loeb, holds 460,000 shares worth $219,682,200, making up 4.69% of the fund’s portfolio, after adding 68%.
Stanley Druckenmiller’s Duquesne Capital holds TSM as its second-largest position, with 589,680 shares worth $281,613,000, or 5.4% of the fund’s portfolio. Druckenmiller increased the position by 20% last quarter. Duquesne’s total portfolio value stood at $5,210,860,000, up 1.54% for the quarter.
Photo by Ruben Sukatendel on Unsplash
Why Is Everyone Buying TSMC?
TSMC’s revenue jumped 36% year over year in the most recent quarter, while net income surged 77%. Margins are strong because fab costs are mostly fixed, so once production runs at full capacity, extra output adds mostly to profit.
TSMC has also been converting N5 tooling over to N3 production without much added expense, which is boosting profits further. On top of that, there’s no real competitor below 5nm, giving TSMC full pricing power at the leading edge. Third-quarter revenue guidance points to about 37% year-over-year growth at the midpoint. Gross margin guidance sits at 65% to 67%. It was recently reported that TSMC plans to raise prices on both advanced and mature node chips by up to 10% by 2027, a move it can make because of its dominant market position. TSMC’s non-GAAP forward P/E sits at about 25 to 30, still below Broadcom’s 47 and in line with or below Nvidia’s 35.
While we acknowledge the risk and potential of TSM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TSM and that has 10,000% upside potential, check out our report about the cheapest AI stock.
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