Here's the Real Winner of the AI Build-Out
With Anthropic's initial public offering (IPO) quickly approaching, many investors are wondering if it could be the best AI stock to buy right now. While I'm not sure how its IPO will go , it could be quite successful.
Still, I think many other companies will be major winners from the AI build-out, but none as surefire as Taiwan Semiconductor Manufacturing(NYSE: TSM). It holds a unique position in the AI arms race. If you're looking for a stock that can grow at an optimized pace, with little chance of failure, Taiwan Semiconductor is your stock.
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Anthropic's IPO is filled with second-hand references to Taiwan Semiconductor
Throughout its IPO, Anthropic discusses how it uses multiple types of computing units to increase performance while reducing costs. The industry standard is the NvidiaGPU. These units can be used for nearly all tasks and deliver high performance across nearly every area.
However, specialized computing units can perform better in some situations. Chips like Tensor Processing Units (TPUs) from Alphabetor Trainium chips from Amazoncan deliver better performance at a lower price in some applications, but not all. When applicable, Anthropic will divert workloads to these chips, but will always have Nvidia's GPUs to do the rest. In addition to Nvidia's GPUs, it's also starting to source some from Advanced Micro Deviceswhen the outright performance from Nvidia GPUs isn't necessary.
That's a wide range of computing units for one company, but it makes the most sense for Anthropic's structure. However, all these computing units have one thing in common: Most, if not all, of their chips come out of a Taiwan Semiconductor facility. This means that it doesn't really matter which company has the best computing unit at the time; as long as they're buying computing units in general, there's a good chance that Taiwan Semiconductor is getting a cut of the pie.
This makes Taiwan Semiconductor a universal AI stock, as it doesn't care which computing unit is being bought, as long as they're buying. Judging by Anthropic and its peers' AI build-out plans, they will be buying AI chips for a long time.
Taiwan Semiconductor confirmed this on its latest conference call, having previously provided guidance for a 50% compound annual growth rate (CAGR) in AI chips from 2024 to 2029. An analyst asked for an updated figure, and CEO C.C. Wei stated that demand is robust and that it will likely exceed that CAGR. That's impressive guidance, and all TSMC knows is that demand will be massive and elevated.
As a result, I think TSMC is a very smart buy for investors. However, its stock isn't valued at an extreme level, either.
Taiwan Semiconductor is attractively priced
As we approach the end of 2026, valuing the stock based on 2027 earnings estimates becomes a smart idea. Taiwan Semiconductor trades at less than 19 times next year's earnings.
TSM PE Ratio (Forward 1y) data by YCharts
While that's not a bargain-bin price, it isn't far off the S&P 500, which trades for 19.2 times forward earnings when the next 12 months are used. So, the market has essentially priced TSMC as a market-average stock, even though we know it will experience market-crushing growth from the AI build-out.
Few companies will benefit more from increased AI usage than Taiwan Semiconductor. With the massive amount of money expected to be spent on AI infrastructure over the next few years, it's a no-brainer investment, and if you don't own shares, it's not too late to buy.
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Keithen Drury has positions in Alphabet, Amazon, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy .
Here's the Real Winner of the AI Build-Out was originally published by The Motley Fool
