TSMC in 2026: Why This Semiconductor Giant Deserves a Place Among Your Top Stocks to Buy

The race to build artificial intelligence infrastructure shows no signs of slowing down. Tech giants are doubling down on their investments to expand computing capacity, spending hundreds of millions of dollars to support the platforms powering the next generation of AI models. While attention often focuses on the flashy AI companies and chip designers, there’s a quieter winner that benefits from all this spending: Taiwan Semiconductor Manufacturing (NYSE: TSM), the world’s leading contract chipmaker. Here’s why TSMC stands out as a compelling addition to any top 10 stocks portfolio in 2026.

Financial Performance That Speaks for Itself

TSMC’s recent earnings paint a picture of remarkable profitability combined with impressive growth. The company achieved 36% full-year sales growth in 2025, with management guiding for another 30% increase in 2026. More impressive is the target compound annual growth rate of 25% through 2029—a rare achievement for a company already generating $122 billion in annual revenue.

The profit story is equally compelling. In the fourth quarter of 2025, gross margins expanded to 62.3% from 59% in 2024, while operating margins jumped to 54% from 49%. Management expects gross margins to reach 63-64% in the first quarter of 2026 and remain above 56% long-term, with operating margins between 54-56%. For a capital-intensive business that constantly reinvests in manufacturing facilities, these margins demonstrate exceptional operational discipline and pricing power.

Strategic Capital Deployment: The Engine of Future Growth

TSMC isn’t sitting idle with its profits. Capital expenditures surged to $41 billion in 2025, up from $30 billion in 2024, and management recently announced a significant increase to approximately $54 billion for 2026. Notably, 70-80% of this spending targets “advanced process technologies”—the cutting-edge manufacturing capabilities that give TSMC its competitive moat.

This aggressive capex strategy sends a clear signal: management sees abundant opportunities ahead. The company is building capacity specifically to meet surging demand from hyperscalers and technology companies. Unlike arbitrary spending, this capital deployment directly correlates with pipeline demand and market opportunities. When TSMC invests heavily, investors should view it as confidence in multi-year growth ahead.

The AI Tailwind Creating Outsized Opportunities

While TSMC manufactures chips for numerous applications beyond AI, the artificial intelligence segment represents an undeniable growth engine. The High-Performance Computing (HPC) segment—which encompasses AI and related workloads—accounted for 58% of revenue in 2025 and grew 48% year-over-year. This isn’t a minor business line; it’s nearly three-fifths of the company’s total revenue and the fastest-growing segment.

The AI infrastructure build-out remains in its early innings. Hyperscalers continue announcing massive spending plans for data centers and computational infrastructure. TSMC’s foundry services are indispensable to this build-out, as nearly every company developing AI chips relies on TSMC’s manufacturing prowess. This creates a structural growth dynamic that should persist for years.

Why TSMC Deserves Your Investment Attention Today

When market analysts compile their lists of top stocks to buy for the next decade, the screening process reveals companies with three critical qualities: sustainable competitive advantages, strong financial performance, and exposure to high-growth markets. TSMC checks every box.

The company controls an irreplaceable role in the global semiconductor supply chain, has demonstrated exceptional profitability even while dramatically increasing capital investment, and sits at the center of the AI infrastructure boom. Management’s guidance for 25% compound annual growth through 2029 reflects confidence in both the sustainability of current trends and the company’s operational execution.

For investors looking to build a portfolio of quality stocks that can deliver meaningful returns in the coming years, TSMC represents the rare combination of proven financial strength, strategic positioning, and exposure to one of the decade’s most important technological transitions. Whether building a core holding or adding to an existing position, 2026 presents a timely opportunity to gain exposure to this semiconductor champion.