The Great AI Betting War: Who Will Win the Technological Race?

The market is betting large sums on AI conjecture, with top tech companies like Alphabet, Meta Platforms, and Microsoft Corp. paying massive amounts for talent and technology. The potential payoff for whoever wins the AI race is huge, but investors are left with many unanswered questions, including who the big winners will be and what shape the AGI industry might take. The seven companies currently leading the market in AI efforts make up nearly a quarter of the world's stock market wealth.

The artificial intelligence (AI) boom has been a significant driver for the semiconductor industry, with Taiwan Semiconductor Manufacturing (TSMC) emerging as a key player. TSMC, the world's largest semiconductor foundry, reported impressive second-quarter results on July 17, highlighting its leadership in the AI chip market.

TSMC's Q2 revenue increased by 44% year-over-year (YoY) to $30.1 billion, exceeding the high end of its guidance range. The company's adjusted earnings per share (EPS) grew at a faster pace of 61%, reflecting its strong pricing power. This robust performance is a testament to the growing demand for AI chips, which are essential for AI-enabled smartphones and other advanced technologies.

TSMC's market dominance is evident in its 68% share of the global semiconductor foundry market, well ahead of its nearest rival, Samsung. The company's technological lead in process nodes allows it to raise prices, contributing to a 5% increase in gross margin last quarter.

Looking ahead, TSMC expects its full-year revenue to grow by 30% in 2025, up from its earlier estimate of mid-20% growth. The company's guidance takes into account potential tariffs, yet it has raised its outlook, indicating sustainable growth prospects. This growth is driven by the secular opportunity presented by AI, with the investment in AI chips and computing hardware expected to exceed $3 trillion by 2030 [1].

TSMC's stock has seen a significant rise, up 59% in the past three months. Despite this, it trades at a 28 times trailing earnings multiple, compared to the Nasdaq 100 index's average earnings multiple of over 32. This valuation suggests room for further upside, making TSMC an attractive AI stock for investors.

However, it's essential to consider other AI-focused companies as well. The Motley Fool Stock Advisor team recently identified 10 stocks they believe are better investments than TSMC [2]. Investors should conduct thorough research and consider their risk tolerance before making investment decisions.

References:
[1] https://www.theglobeandmail.com/investing/markets/stocks/AVGO/pressreleases/33664145/this-tech-giant-is-the-best-artificial-intelligence-ai-chip-stock-to-buy-right-now/
[2] https://www.globenewswire.com/news-release/2025/07/25/3121820/0/en/Home-Energy-Management-System-Market-Size-Worth-USD-14-14-Billion-by-2032-Owing-to-Growing-Demand-for-Energy-Efficient-Smart-Homes-SNS-Insider.html