1 Super Semiconductor Stock to Buy Hand Over Fist in 2026, According to Wall Street

Looking at Wall Street analysts' one-year price targets can serve as a source of ideas for investors. While their analysis shouldn't be the end-all for investors, it serves as a great starting point.

One company that looks like it has great potential from the analyst community is Taiwan Semiconductor Manufacturing (NYSE: TSM). They have an average one-year price target on its stock of $342, according to Yahoo! Finance.

That represents around 20% upside from today's levels, which would be an excellent one-year return for TSMC. The long-term market average performance is about 10%, so this would essentially outperform the stock market by double.

This makes it a stock investors should be buying hand over fist entering 2026, but are the analysts right on this one?

Image source: Getty Images.

TSMC is a critical part of the AI buildout

While companies like Advanced Micro Devices or Nvidia may get most of the attention when it comes to providing artificial intelligence (AI) computing units that go into data centers, Taiwan Semiconductor should also be a part of the discourse. It's one of a handful of semiconductor foundries that provide high-tech computing chips necessary for advanced computing units to run, and is the largest by revenue of its peers.

Few companies are as critical in the AI buildout as Taiwan Semiconductor, a company that will thrive as long as there is increased AI spending. With the AI hyperscalers all informing investors that 2026 will be a year of record-breaking capital expenditures after setting a previous record in 2025, this part of the TSMC investing thesis is alive and well.

Another reason why Taiwan Semiconductor has thrived as a foundry is its commitment to continuous innovation. With its new 2-nanometer chip node entering production, it's keeping that commitment.

The 2nm chips offer a massive benefit over previous-generation 3nm chips: When configured to run at the same speed, 2nm chips consume 25% to 30% less power than 3nm chips. That's a big deal for any company involved in AI, as energy availability is starting to become a massive bottleneck. If TSMC can reduce grid demand by 25% to 30%, it will be widely implemented in future AI buildouts.

TSMC is putting up impressive growth figures

While the investment story in TSMC is rock solid, so are its finances. During Q3, TSMC's revenue rose at a 41% pace in U.S. dollars. That showcases massive growth and lets investors know that the AI competition is alive and well. This strength is expected to continue, as demand for AI computing units is slated to rise dramatically over the next few years.

Nvidia projects that global data center capital expenditures will reach $3 trillion to $4 trillion by 2030. AMD projects that its data center division will grow at a 60% compound annual growth rate (CAGR) through 2030, while its overall business rises at about a 35% rate. Those are huge growth projections, and TSMC will be the one providing chips to fuel that growth. This makes TSMC not only a smart buy for 2026, but also for the next five years.

As a final cherry on top, Taiwan Semiconductor's stock isn't all that expensive, especially when compared to some of the other stocks involved in the AI sector of the market.

TSM PE Ratio (Forward) data by YCharts

At 28 times forward earnings, TSMC stock isn't cheap, but it isn't as expensive as its peers (AMD and Nvidia trade for 55 and 38 times forward earnings, respectively). A lower premium makes TSMC a smart buy in this sector, as it's slated to benefit from increased AI spending across the board.

I think Wall Street analysts have the direction of TSMC's stock correct, making it a great stock to buy hand over fist entering the new year.

Keithen Drury has positions in Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.