Demand Boom Sent Taiwan Semiconductor Manufacturing Company Limited (TSM) Higher

Baron Fund, an investment management company, released its Q4 2025 letter for “Baron Durable Advantage Fund”. A copy of the letter can be downloaded here. The Fund returned 2.6% in the fourth quarter, which mirrored the S&P 500 Index’s 2.7% return. The Fund returned 16.6% in 2025, compared to 17.9% for the Index and 16.1% gain for the Peer Group, Morningstar Large Growth Category average. Moving to 2026, in an environment dominated by geopolitics, changing regulatory trends, and artificial intelligence, the Fund focuses on investing in high-quality, large-cap companies with solid competitive advantages, proven track record, and consistent shareholder returns. Please review the Fund’s top five holdings to gain insights into their key selections for 2025.

In its fourth-quarter 2025 investor letter, Baron Durable Advantage Fund highlighted Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) as a notable contributor. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the world's leading manufacturer of integrated circuits and other semiconductor devices. On February 10, 2026, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stock closed at $361.91 per share. One-month return of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was 10.64%, and its shares are up 75.36% over the past twelve months. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) has a market capitalization of $1.877 trillion.

Baron Durable Advantage Fund stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its fourth quarter 2025 investor letter:

"Semiconductor giant Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) contributed to performance during the quarter with shares up 9.0%, and up 55.5% in 2025, driven by robust demand for AI chips. After reporting its most recent quarterly results, TSMC raised its 2025 revenue growth guidance from “close to mid-20s%” year-on-year in the first quarter to “around 30%” in the second, and now to “close to mid-30s%” (in USD terms) as “AI demand continues to be very strong, even stronger than we thought three months ago”7. We believe that TSMC’s competitive position in leading-edge semiconductor manufacturing remains unmatched with a 90% market share (and 65% overall). TSMC’s unique positioning in the market is underlined by the company’s ability to raise prices as demand for its next generation nodes continues to be robust. We also believe that TSMC will benefit from a long duration of growth underpinned by the AI buildout. Note that TSMC will benefit regardless of the ultimate market share split between NVIDIA, Advanced Micro Devices, OpenAI, or Anthropic and whether ASICs would garner any significant market share. It’s the ultimate picks and shovels supplier to AI."

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is in 9th position on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 194 hedge fund portfolios held Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) at the end of the third quarter, up from 187 in the previous quarter. While we acknowledge the potential of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) and shared a list of best extremely profitable stocks to invest in according to hedge funds. In addition, please check out our hedge fund investor letters Q4 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.