We recently published a list of Top 10 Buzzing AI Stocks to Watch Now. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against other top buzzing AI stocks to watch now.
Doug Clinton, Deepwater Asset Management co-founder, said in a latest program on CNBC that the AI trade is still intact but the market is going through a period of “doubt” and many major AI stocks have lost their momentum.
“The vibe has shifted, and I think investors, more broadly, almost want to believe the AI trade is over. They’re looking for evidence, reasons to doubt. That’s the hard part for this trade right now—momentum has lost its momentum. From our perspective, the AI trade is still real. I don’t think this boom is over; I still see two to four years ahead. But in every technology-driven boom, we go through periods of doubt. That’s a healthy part of the cycle, and we just need to work through it.”
When asked about high valuations, the analyst said many of the AI stocks have “reasonable” valuations and upside.
“If you look at the hyperscalers, I think their valuations are still largely reasonable, even though they make up a big share of the market, which concerns some investors. We’re talking about mid-20s PEs for them. Some of the more growth-driven momentum names still have upside. Their multiples look expensive now, but as they continue to grow—and that’s the key question—those multiples will actually appear higher now than they will in the future.”
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For this article, we picked 10 AI stocks the market is talking about these days. With each stock, we have mentioned the number of hedge fund investors. 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)
Number of Hedge Fund Investors: 186
Glen Kacher, Lights Street Capital founder, said in a latest program on CNBC that he is still bullish on the top “AI 5” semiconductor companies which include Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM). Here is how he made his case for these companies:
“There’s nothing in the technology pipeline right now that can match the innovation of generative AI. Generative AI creates a customized answer for the user based on underlying data, and this is a brand new method of computing. It’s created a massive investment cycle, over $200 billion a year of capital expenditures, and it’s growing in order to deliver on what is just an incredible technology, unlike anything else we’ve seen in my lifetime, certainly. If you look back to the DeepSeek scare, a month or two earlier we were worried that things weren’t scaling, and then we saw a big scaling event. Now, everyone’s scared that we’re scaling too much.”
Wedgewood Partners stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q4 2024 investor letter:
“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was another top contributor to performance during the quarter and for the year. The Company’s earnings growth dramatically accelerated compared to last year as the Company’s wafer fabrication and packaging volumes soared in 2024. In addition, the Company customer prices rebounded in the face of more normalized capital expenditures. The Company maintains a near-monopoly in the fabrication of nearly every new AI accelerator brought to market over the past two years. They continue investing tens of billions to build and 7ill future capacity with orders for what seems to be insatiable hyperscale demand for accelerated computing. The stock ended the year trading at a consensus forward earnings multiple that is several points lower than large cap growth benchmarks, despite the Company’s dominant position in the most important industry that is driving one of the largest technological shifts in a generation.”
Overall, TSM ranks 3rd on our list of top buzzing AI stocks to watch now. While we acknowledge the potential of TSM as an investment, our conviction lies in the belief that under the radar 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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