We recently compiled a list of the 10 Tech Stocks to Monitor Amid Market Volatility According to Bernstein Analyst. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against the other tech stocks to monitor amid market volatility.
In the past few weeks, a major selloff in the technology sector, mostly over concerns about return on investments amid ballooning capital expenditures on artificial intelligence (AI), has hit the stock market, sending valuations crashing and igniting fears of an AI bubble at the marketplace that might be about to burst. However, Stacy Rasgon, who has covered semiconductor stocks, one of the most prominent sectors in the AI world, for over fifteen years, has advised investors to stay the course, terming fears of a bubble as overblown. Rasgon claims that even though chances of an air pocket, used to refer to stock plunges, are 100%, he is confident the time for them is not now. He pointed to the very real and massive AI data center build as an example, predicting it would go on for a few years, helping push AI stocks higher.
In a recent interview with IBD, Rasgon zeroed in on semi stocks, highlighting that they had been massively outperforming, mostly on AI. However, he cautioned investors about potential upside to these firms outside of AI, like in the PCs or smartphones business, noting that even though they might be better than last year, it was evident they would not be growing at a rapid pace anytime soon. He also added that outside of AI, data center, server CPU, and networking demand remained weak. Bernstein, the investment advisory where Rasgon practices his trade, recently revealed a basket of prominent stocks in the tech, media, and communications domain that had upside potential of almost 26% to price targets by the advisory.
This list comes amid worries over the state of the job market and consumer spending in the United States, as well as a potential artificial intelligence air pocket. Bernstein analysts have advised investors to put their money to work in this period of heightened market volatility. Several AI-related tech names are trading at huge discounts due to the selloff, with some of these names discussed in detail below. More information about these firms can be found by accessing 33 Most Important AI Companies You Should Pay Attention To and 17 Trending AI Stocks According to Latest News And Analyst Ratings.
Our Methodology
For this article, we selected companies who operate in the tech domain and have been on the radar of Wall Street analysts. An important investor note by investment bank Bernstein formed the basis for this list. These stocks are also popular among hedge funds. 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a complex network of integrated circuits used in logic semiconductors.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 156
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) makes and sells integrated circuits and semiconductors. The chip revolution that powers the AI boom can be better understood by looking at a few key numbers. For example, consider the first Intel microprocessor. It had about 2,000 transistors. Now, compare this to the latest NVIDIA chips, one of the customers of TSM, that are packed with more than 200 billion transistors. The difference is mind-boggling. Making identical copies of a single chip for an iPhone requires one TSM fab to produce more than a quintillion transistors every few months. Viewed over the course of a year, the entire semiconductor industry produces more transistors than the combined quantity of all goods produced by all other companies, in all other industries, in all human history, researchers contend. TSM is the apex predator in this business.
Bernstein analyst Mark Li has an Outperform rating on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stock and recently raised the price target to $200 from $150, noting that data center AI revenue was rising for the firm as planned, but there was more data indicating AI driving an upward shift in smartphone. The analyst further added that more CoWoS, earlier Lunar Lake, and possible price hike can drive EPS to grow another 26% in 2026.
Overall TSM ranks 2nd on our list of the tech stocks to monitor amid market volatility. While we acknowledge the 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 timeframe. If you are looking for an AI stock that is more promising than TSM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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