Is Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM) the Most Promising Stock According to Analysts?

We recently published a list of the 11 Most Promising Stocks According to Analysts. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM) stands against other promising stocks.

On April 23, Stephen Parker, JPMorgan Private Bank co-head of global investment strategy, joined ‘Squawk Box’ on CNBC to express that investors should have a normal level of risk in their portfolios right now. Parker explained that while he is fully in support of remaining invested in the market, he does recommend clients to stay focused on sectors that may be more resilient in a downturn to help protect against losses while staying long. His baseline guidance is for clients to maintain a normal level of risk in their portfolios. Those holding too much cash should get invested, and those overexposed to US markets and the dollar should consider adding non-US exposure. He advised that this is a period where investors must be comfortable with discomfort, as policy uncertainty broadens the range of possible outcomes.

Parker acknowledged that while downside risks are top of mind for many investors, there is also upside potential, especially if there are positive policy surprises, such as clarity on tariffs, which could drive markets back to their highs sooner than expected. His outlook for the S&P 500 index is a wide range, with the high end being flat for the year and a possible range of 5,700-6,200. This reflects heightened policy uncertainty and difficulty in pinpointing a single target. Parker pointed out that even if it takes two years for markets to return to all-time highs, an 8% annual return would still be compelling for equities.  Reflecting on the start of the year, he noted that market multiples were considered rich following 2 consecutive years of 20%+ gains. There was optimism around deregulation and changes to corporate taxes, but few expected the S&P 500 to remain flat for 2 years from a level of 6,200. Parker further explained that even without pro-business policy changes, the market may have faced challenges after such strong recent gains. The pullback in high-performing segments of the US market has brought valuations closer to what he considers normal levels, which also sets the stage for potential upside.

Our Methodology

We sifted through the Finviz stock screener to compile a list of the top stocks that had high analysts’ upside potential (at least 35%). The stocks are ranked in ascending order of their upside potential. We have also added the hedge fund sentiment for each stock, as of Q4 2024, which was sourced from Insider Monkey’s database.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM)

Number of Hedge Fund Holders: 186

Average Upside Potential as of April 23: 41.23%

Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM) manufactures, packages, tests, and sells integrated circuits and other semiconductor devices. It provides various wafer fabrication processes, such as processes to manufacture complementary metal-oxide-semiconductor logic, mixed-signal, radio frequency, embedded memory, bipolar CMOS mixed-signal, and others.

In FQ1 2025, HPC made 59% of the company’s total revenue, which totaled $25.78 billion and improved by 41.40% year-over-year. This HPC revenue itself improved by 7% sequentially due to the sustained demand for AI-related applications, which the CEO of the company anticipates to double in revenue in 2025. This category of AI accelerators includes AI GPUs, AI ASICs, and HBM controllers used for both AI training and inference in data centers.

To support this explosive growth in AI and HPC, TSMC is making substantial investments in advanced packaging technologies, particularly CoWoS (Chip-on-Wafer-on-Substrate). TSMC is working to double its CoWoS capacity in 2025. Despite a projection of a mid-40% revenue CAGR from AI accelerators for the five years starting from 2024, Barclays analyst Simon Coles lowered the price target on the stock to $215 from $255 while maintaining an Overweight rating on April 21.

The company’s results and guidance showcased strong AI chip demand, which is why Sands Capital Technology Innovators Fund stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q4 2024 investor letter:

“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) third-quarter 2024 results and guidance showcased strong continued demand for artificial intelligence (AI) chips. Revenue increased by 29 percent, and earnings saw a 54 percent rise year-over-year. Gross margins were at their highest since 2022, bolstered by price hikes and record utilization at both the 3 nanometer (nm) and 5nm nodes. TSMC’s full-year revenue outlook was revised upward from 25 percent to 30 percent growth. The company also anticipates higher capital expenditure in 2025, a leading indicator for revenue.

Meanwhile, TSMC’s competitive position within the leading-edge chip fabrication industry has improved. The company noted that demand for its next-generation 2nm (N2) node is considerably higher than for its predecessor, N3. Additionally, TSMC has more capacity for N2 than N3. This situation contrasts with Intel and Samsung, which both recently disclosed struggles in ramping up their leading-edge nodes. Together, Intel and Samsung account for approximately $25 billion of foundry revenue, which could potentially migrate to TSMC over time…” (Click here to read the full text)

Overall, TSM ranks 5th on our list of the most promising stocks according to analysts. While we acknowledge the growth potential of TSM, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than TSM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

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