A New AI Tailwind Could Come to Boost Taiwan Semiconductor Stock

When it comes to spotting the next few years of trends for any given industry in the global economy, investors are often paid more for their thinking and waiting rather than for playing it safe until everything is as clear as day. With this in mind, a new trend may be forming after the latest jobs data in the United States revealed an unexpected discrepancy.

Although the July 2025 jobs number was slightly lower than expected (73,000 jobs), individuals already employed or seeking work appeared to prioritize wage growth over other factors. Now that inflation is a major concern for every American, and the labor supply is tightening due to immigration regulation changes, this could be the perfect opportunity for artificial intelligence to shine.

If businesses need to pay employees higher wages, they might raise product and service prices to offset the increased payroll—potentially contributing to inflation and affecting affordability for consumers. Instead, investing in artificial intelligence could not only offset new costs but boost efficiency in the future, and that’s where Taiwan Semiconductor Manufacturing (NYSE: TSM) comes into play.

America Is Moving Toward AI Dominance

With a new bill released by President Trump called America’s AI Action Plan, it is clear that the entire country is now focused on maintaining its dominance in artificial intelligence within the global economy. As the stakes (and competition) are higher than ever, so are the potential rewards in the technology sector.

This bill focuses on onshoring the manufacturing and supply chain capacity for chips and semiconductors within the United States, which creates some short-term labor opportunities. However, these openings might be located somewhere other than where most people expect.

Of course, manual factory labor is more expensive in the United States than in other regions like Asia, so how will these companies offset the cost of manufacturing chips domestically? Investors might imagine a world where these factories are fully robotized and automated; some companies in the automotive industry are already making this happen.

In that world, employees responsible for developing and maintaining this new infrastructure could achieve the wage growth they seek. At the same time, companies can offset this cost by increasing their efficiency simultaneously. This presents a significant opportunity for a company like Taiwan Semiconductor moving forward.

Smart Money Connects the Dots

Analysts at some of the biggest investment firms get paid the “big bucks” to connect the dots on situations like these and determine whether these scenarios could play out in the future. Considering that Jennison Associates has built up a new stake worth $2.7 billion, investors could assume the chances of this playing out are high.

That new institutional investment acts as a vote of confidence, especially since Taiwan Semiconductor is among the latest companies to reaffirm its commitment to onshore operations in the United States, aligning with and supporting the current administration's overall goal.

However bullish all this evidence may seem, some investors may be worried about whether Taiwan Semiconductor stock has more room to move higher, especially now that it trades at 96% of its 52-week high. One way to answer this is to compare today’s valuations to those of other key players in the global semiconductor supply chain.

With a forward price-to-earnings (P/E) ratio of 21.7x today, Taiwan Semiconductor trades at a steep discount to other names like NVIDIA Co. (NASDAQ: NVDA) and its much higher 31.6x valuation multiple. This theme can be extrapolated to other names in the space, where investors will see similar discounts as the norm.

Here is one important piece of information to consider: NVIDIA couldn’t be the giant it is today without Taiwan Semiconductor. Taiwan Semiconductor supplies the manufacturing equipment and wafer material that NVIDIA needs to produce its industry-leading chips.

This crucial position in the supply chain warrants a higher valuation because it represents a business moat that most investors would be willing to pay premiums for. Following that logic, Taiwan Semiconductor should be valued at least at NVIDIA's current forward P/E of 31.6x, if not higher, given its crucial role in the supply chain.

Again, that might be the reasoning behind the recent institutional buying, and it is one that retail investors can adopt into their own idea generation process when considering a potential allocation toward this industry leader.

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The article "A New AI Tailwind Could Come to Boost Taiwan Semiconductor Stock" first appeared on MarketBeat.