We recently published a list of Top 10 Semiconductor Stocks to Buy Now. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against other top semiconductor stocks to buy now.

The global semiconductor industry reported a collective revenue of $626 billion in 2024, an 18.1% increase YoY, as per Gartner. Data centers accounted for the second largest sector for semiconductors, behind Smartphones, with revenues in this sector nearly doubling from $64.8 billion in 2023 to $112 billion in 2024. The International Data Corporation estimated that global demand for semiconductors will grow by 15% in 2025.

The U.S. semiconductor sector is a critical component of the global technology landscape, and its performance has significant implications for the broader economy. In recent years, the industry has experienced both growth and challenges, shaped by several factors. According to analysts, the growth is driven by the increasing reliance on technology in various sectors, including consumer electronics, automotive, healthcare, and artificial intelligence.

The industry has been at the forefront of technological innovation, with companies investing heavily in research and development. This has led to the development of more advanced chips, such as those using smaller process nodes and new materials, enabling greater performance and efficiency. The rapid pace of technological innovation continues to drive demand for more advanced semiconductors. As mentioned earlier, the rise of artificial intelligence (AI) and other emerging technologies is particularly important as these applications require high-performance chips that US companies are well-positioned to provide.

The semiconductor industry is highly competitive, with companies from other countries, particularly in Asia, posing a significant challenge to U.S. companies. This competitive environment has led to increased pressure on pricing and a further need for innovation to maintain a competitive edge. The industry is increasingly affected by geopolitical tensions, particularly between the U.S. and China. The ongoing trade tensions between the US and China have created uncertainty and challenges for the semiconductor industry. These tensions have led to restrictions on trade and investment, which can disrupt supply chains and limit market access for US companies. However, they have also spurred efforts to diversify supply chains and increase domestic production, which could benefit the US semiconductor sector in the long run.

The U.S. government has recognized the strategic importance of the semiconductor industry and has taken steps to support its growth. The CHIPS and Science Act of 2022, which provides significant funding for domestic semiconductor manufacturing and research, is a prime example of this support.

The overall health of the global economy also plays a role in the performance of the semiconductor sector. Economic downturns can lead to decreased demand for electronic devices, which in turn reduces demand for semiconductors. Conversely, periods of economic growth can boost demand for semiconductors and create opportunities for US companies. With the election of President Donald Trump into the Oval Office, analysts are confident that the tech sector will continue to show improved performance.

Our Methodology

For this list, we identified the 10 semiconductor stocks which have the highest upside potential using 12-month consensus price target. Then we merged these stocks with Insider Monkey’s Q4 2024 proprietary hedge fund holdings database and identified the 10 most popular hedge fund semiconductor stocks. The stocks are ranked in ascending order of their hedge fund positions.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)

No. Of Hedge Fund Holders: 186

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) manufactures, packages, tests, and sells integrated circuits and other semiconductor devices globally, dominating the global foundry market with 50% market share. The company hit sales exceeding $88 billion in Q4 of 2024, with further investments in AI infrastructure.

At the end of January 2025, Taiwan Semiconductor Manufacturing Company Limited’s (NYSE:TSM) stock price slumped after the news of a Chinese AI company producing a more efficient AI model, similar to all other tech giants. If anything, analysts believe this creates a buying opportunity for investors who wish to jump onto the chance to invest further. The company’s CEO C.C. Wei and President Trump stated last week that the company will invest $100B in new capital in the U.S. over the next four years as it looks to boost its presence in the U.S. A spokesperson stated:

“Back in 2020, thanks to President Trump’s vision and support, we embarked on our journey of establishing advanced chip manufacturing in the United States. We’re pleased to have an opportunity to meet with the President and look forward to discussing our shared vision for innovation and growth in the semiconductor industry, as well as exploring ways to bolster the technology sector along with our customers.”

A month prior, the US applied trade tariffs to China, company representatives met with the legal counsel of the US Commerce Department, and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) spokesperson stated that the company is dedicated to adhering to all relevant laws and regulations and remains fully committed to following the newly introduced export control rules.

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) has already received $1.5B of the CHIPS Act grant as part of previously agreed upon milestones. The company’s share price stands at $177.12 as of Friday, 7th March 2025, and a consensus of the average price prediction for trading twelve months at $244.27, an upside of 18.51%.

Overall, TSM ranks 2nd on our list of top semiconductor stocks to buy now. While we acknowledge the potential for 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 delivers higher returns than TSM, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.