We recently compiled a list of the 17 Trending AI Stocks According to Latest News And Analyst Ratings. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against the other trending AI stocks.
One of the biggest breakthroughs of artificial intelligence in the past few years has been the advances in natural language processing. These AI models in language are now making their way into the business world and the society at large. Over a course of the next decade, informed estimates by investment advisors at Goldman Sachs indicate that these AI tools could drive a 7% increase in global GDP, worth nearly $7 trillion, and lift productivity growth by 1.5 percentage points overall. Expert economists Joseph Briggs and Devesh Kodnani recently wrote in a report that the ability of AI tools to generate content that is indistinguishable from human-created output and to break down communication barriers between humans and machines reflects a major advancement with potentially large macroeconomic effects.
Some of these macro factors are more discernible in the form of numbers. A recent study on artificial intelligence by Stanford University in the United States reveals that businesses are already outpacing academics when it comes to training AI models. For example, in 2023, the AI industry was able to train nearly 51 notable machine learning models (read more about these firms by accessing 33 Most Important AI Companies You Should Pay Attention To) compared to just 15 for academia. This happened despite the costs associated with training models rising. For instance, ChatGPT 4, the latest iteration of the popular ChatGPT that launched the AI wave back in late 2022, cost nearly $80 million to train. Similarly, Gemini Ultra, an AI tool developed by Google, cost $191 million to compute. The number of AI patents is also increasing, evidenced by the fact that since 2010, the number of granted AI patents has increased more than 31 times.
This exciting phase in the world of technology has ushered in a new boom for the world economy, previously plagued by inflation concerns, geopolitical conflicts, and stagnating demand figures. The bullish sentiment on AI needs to be balanced with caution. In the long run, investors should prepare themselves for significant changes to how the world works as AI could automate nearly 300 million jobs. In previous cycles of automation, new jobs and opportunities have risen to replace this. Recognizing these opportunities (read more about them by accessing 20 Industrial Stocks Already Riding the AI Wave) ahead of the time could go a long way towards balancing the risk profiles of growth-heavy portfolios. Recent research suggests that 60% of the workforce presently was occupied in positions that did not exist just half a century ago, lending credence to claims that over 80% of employment growth since the time can be explained by tech-driven innovation.
Our Methodology
For this article, we selected AI stocks based on the latest news and analyst ratings. 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: 135
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) makes and sells integrated circuits and semiconductors. These chips are used by some of the biggest technology companies in the world, including Apple, NVIDIA, and Advanced Micro Devices, among others. The Taiwan-based firm has benefited from the AI boom, with the demand for the products it markets rising rapidly. One such indicator of this is the latest revenue figures released by the company. In the month of July, the firm earned around NT$257 billion, up more than 44% compared to July 2023. The revenue for the first seven months of the year was NT$1.5 trillion, climbing by over 30% compared to the same period in 2023.
Finance experts like Susquehanna analyst Mehdi Hosseini are bullish on the long-term growth prospects of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), with the analyst recently maintaining a Positive rating on the stock with a price target of $250. Recent reports indicate that the firm will raise prices on key 3nm and 5nm nodes in 2025. This rise should help the firm beat analyst expectations on 2025 EPS, which presently sit around $6.3, up nearly 21% on a year-on-year basis.
Overall TSM ranks 10th on our of the trending AI stocks according to latest news and analyst ratings. 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.