Why TSMC Might Be Your Best AI Stock Pick Right Now in January

The calendar flipped to a new year, and with it comes fresh opportunities to reassess your portfolio strategy. While artificial intelligence continues to dominate investment conversations in 2026 just as it did throughout the past few years, plenty of stocks and shares in the AI space still offer attractive entry points despite their strong recent performance.

Taiwan Semiconductor Manufacturing (TSMC, NYSE: TSM) is a perfect case in point. The stock surged more than 50% in 2025, yet it may still present one of the most compelling opportunities for investors looking to gain exposure to the AI boom heading into January.

The Unstoppable Foundry Leader

Here’s a critical fact: virtually every piece of technology—from AI data centers to your smartphone—relies on microchips. While companies like Nvidia and Advanced Micro Devices design these chips, they typically outsource manufacturing to specialized foundries with the required expertise and facilities.

Taiwan Semiconductor holds an unassailable position as the world’s leading chip foundry. According to Counterpoint Research, TSMC commanded approximately 72% of the global foundry market by revenue in the third quarter. Its closest rival, Samsung, captured merely 7%.

What makes this dominance even more remarkable? TSMC has actually expanded its market share during the current AI investment cycle. The company held 65% market share midway through 2024. As hundreds of billions of dollars flow into AI infrastructure, chip manufacturers flock to TSMC because no other operation can manufacture high-end chips at the required scale and speed. This isn’t just market leadership—it’s an essential monopoly-like position in the supply chain.

The Next Wave: Nvidia’s Rubin Architecture

The relationship between Nvidia and Taiwan Semiconductor runs deep. TSMC manufactures Nvidia’s most advanced processors, from the Hopper architecture through its successor, Blackwell. The innovation pipeline continues relentlessly.

Nvidia’s Rubin architecture is set to arrive in 2026, and TSMC will build it using its cutting-edge 3-nanometer process—delivering superior performance while consuming less power. Consider this: Nvidia recently announced a $500 billion order backlog. For a company generating $187 billion in annual sales, this backlog signals an extraordinarily robust growth trajectory ahead.

This expansion in Nvidia’s business directly translates to revenue acceleration for Taiwan Semiconductor. In fact, Nvidia has now challenged Apple as TSMC’s largest customer, underlining the semiconductor foundry’s pivotal role in the AI infrastructure buildout.

Valuation Still Offers Room to Run

Here’s where the investment case gets interesting. Despite its commanding market position and recent stock appreciation, TSMC still trades at reasonable valuations given its growth profile.

The company’s price-to-earnings ratio sits just under 30 times based on full-2025 earnings estimates. While that might sound elevated, analysts project TSMC will grow earnings by approximately 29% annually over the next three to five years. When you apply the price/earnings-to-growth (PEG) ratio—a metric that weighs valuation against growth rate—TSMC’s PEG of roughly 1 signals exceptional value.

For context, many investors willingly accept PEG ratios between 2 and 2.5 for high-quality stocks and shares. TSMC, as the dominant global chip foundry, easily meets those quality standards. Even if earnings growth disappoints slightly relative to analyst expectations, the company’s structural position in AI infrastructure provides a relatively high floor beneath the stock price, with meaningful upside potential.

The Bottom Line

Unless the industry experiences a dramatic, widespread pullback in AI spending—an increasingly unlikely scenario—Nvidia’s massive backlog should propel TSMC to new revenue heights as orders flow through its manufacturing facilities. The company’s mission-critical role in powering the AI era creates a compelling investment thesis for January and beyond.