When it comes to making chips, all major computer companies turn to Taiwan Semiconductor.
Its chip manufacturing business provides critical production capacity needed by the industry.
Taiwan Semiconductor is launching a new technology that could solve the energy crisis.
10 stocks we like better than Taiwan Semiconductor Manufacturing ›
Finding the best stocks to buy for 2026 is no easy task. First of all, it must be addressed whether the actions will come from a field related to AI or not. There are growing fears of an AI bubble forming, but those fears are overridden by the real money being spent by AI hyperscalers, who are rushing to develop as much computing power as possible. I think one of the best stocks to buy heading into 2026 comes from this industry and is a key supplier.
While I will consider a discussion about whether NVIDIAThe dominance of is declining, what is not up for debate is how much is spent on AI infrastructure. After setting records in 2025, AI hypercalers appear to be setting a new record for data center capital expenditures again in 2026. There are several companies positioned to take advantage of that development, but none are better off than Semiconductor manufacturing in Taiwan(NYSE: TSM).
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Taiwan Semiconductor is a chip manufacturing company and sells its production capacity to several companies in the chip space. Taiwan Semiconductor is considered the leading company in its industry, which is why almost all major computer unit designers partner with Taiwan Semiconductor. It does not matter if the computer unit purchased is from Nvidia, Advanced Microdeviceseither Broadcom; it most likely has a TSMC chip.
This puts Taiwan Semiconductor in a neutral position, as it benefits from higher spending regardless of which computing unit is the most popular. The trends are clearly in favor of increased data center spending, and that trend is not expected to slow anytime soon.
Nvidia believes global data center capital expenditures will increase from $600 billion in 2025 to $3 or $4 trillion in 2030. Not all of that money will go toward computing, as there are also construction and land costs to consider. AMD offered a similar projection, as they believe the computing market will be worth $1 trillion by 2030. This bodes well for Taiwan Semiconductor, as it will provide the chips to power most of these data centers.
However, one issue that may hinder the industry’s growth is energy capacity. It’s no secret that we could be headed toward power shortages in the near future, and it’s critical to do everything you can to consume less power to maximize computing performance.
Taiwan Semiconductor understands this and that is why its latest technology focuses on improving energy consumption. Its next generation of 2nm (nanometer) chips promises to consume 25% to 30% less power when configured for the same speed as its 3nm predecessor. This is a huge leap in efficiency and may be what is needed to keep AI development going.
These chips are entering production right now and will boost Taiwan Semiconductor’s finances throughout 2026. However, Taiwan Semiconductor is also doing incredibly well right now.
In its most recent quarter, Taiwan Semiconductor’s revenue grew at a rate of 41% in US dollar terms, putting it among the fastest-growing big tech stocks. Since AI development is not expected to slow down any time soon, Taiwan Semiconductor should be able to maintain this growth rate for several years.
Despite its strong growth, the stock doesn’t really have a premium price tag assigned to it.
TSM PE Ratio (1-Year Forward) Data from YCharts
At 23 times next year’s earnings, Taiwan Semiconductor is not priced premium. It is priced lower than its peers: AMD trades at 32 times next year’s earnings, Broadcom at 25 and Nvidia at 24.
Taiwan Semiconductor is reasonably priced and is set to deliver impressive growth in the coming years. As a result, I think it is the best stock to buy now as you will benefit regardless of which compute unit AI hyperscalers are using. All it takes to succeed is for AI hyperscalers to continue spending big, and they are prepared to do just that.
Before you buy shares in Taiwan Semiconductor Manufacturing, consider this:
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Keithen Drury holds positions at Broadcom, Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has positions and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
The Ultimate Stocks to Buy in 2026 was originally published by The Motley Fool
