Taiwan Semiconductor Manufacturing Company Limited (TSM): Among Billionaire Lei Zhang's Stock Picks with Huge Upside Potential

We recently published a list of Billionaire Lei Zhang’s 10 Stock Picks with Huge Upside Potential. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against other billionaire Lei Zhang’s stock picks with huge upside potential.

Lei Zhang and Hillhouse Capital: Quiet Power in Asian Investing

Lei Zhang, the founder and CEO of Hillhouse Capital, is one of the most influential yet low-profile figures in the world of investing. Born and raised in China, Zhang later studied in the US, earning an MBA from Yale, where he was influenced by David Swensen, the university’s legendary endowment manager. It was with Swensen’s support that Zhang launched Hillhouse in 2005, initially backed with capital from Yale’s endowment fund. Hillhouse Capital started small but quickly established itself as a powerhouse in Asia’s fast-evolving markets. The firm is known for its long-term, research-driven approach, often taking significant positions in high-growth companies and partnering with management teams to help scale operations. Rather than chasing short-term gains, Zhang’s strategy is focused on building durable, competitive businesses.

One of Hillhouse’s early and most notable investments was in Tencent, the Chinese tech giant. The firm got in when the company was still relatively unknown outside China, and the bet paid off tremendously. Other major holdings have included JD, Baidu, and Meituan, as well as a growing number of companies in sectors like healthcare, logistics, and consumer goods. Zhang’s investment style blends elements of private equity and public market investing. He’s not afraid to hold stakes for many years, and Hillhouse often works closely with portfolio companies to improve operations and governance. This hands-on, collaborative model has helped the firm build a strong reputation among entrepreneurs and institutional investors alike.

Hillhouse Capital has since expanded beyond China and now manages tens of billions of dollars across Asia and other markets, with offices in Singapore, Hong Kong, and New York. Despite its size, the firm remains relatively discreet. Zhang himself rarely gives interviews and avoids the spotlight, preferring to let the results speak for themselves. Hillhouse Investment has built a reputation for exceptional returns, achieving annualized gains as high as 52% from its founding through 2012. Its expansion has been fueled by a consistent ability to deliver strong results even as the firm has grown. Hillhouse has a broad sector focus that includes technology and enterprise software. The firm also frequently collaborates with other major investors, such as Sequoia Capital, through co-investment partnerships.

Under Zhang’s leadership, Hillhouse has become synonymous with disciplined growth investing in some of the world’s most dynamic economies. For many, Zhang represents a new breed of the global investor: one who bridges East and West, and who plays the long game in an increasingly complex financial landscape.

Our Methodology

For this list, we picked stocks from Hillhouse Capital’s 13F portfolio as of the end of the fourth quarter of 2024. We listed them in the ascending order of analysts’ average upside potential. These equities are also popular among other hedge funds.

Note: All data was recorded on May 7, 2025.

At Insider Monkey we are obsessed with 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 Company Limited (NYSE:TSM)

Hillhouse Capital’s stake: $8,410,704

Upside Potential: 26.48%

Number of Hedge Fund Holders: 186

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a leading foundry. The company manufactures semiconductors using proprietary customer designs, offering a full suite of wafer fabrication processes, including CMOS, RF, and BiCMOS. It provides design, mask making, TSMC 3DFabric® packaging, and testing services. In 2024, we produced 34% of the “Foundry 2.0” market, up from 28% in 2023. The company’s scale, especially in advanced technologies, and a global customer base, underpin its competitive edge across the semiconductor industry.

In Q1 2025, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) reported revenue of $25.5 billion, down 5.1% sequentially due to smartphone seasonality but supported by AI demand. CapEx reached $10.06 billion, and cash rose to $81 billion. For Q2, revenue is forecasted at $28.4–29.2 billion with a gross margin of 57–59%. The company guided full-year CapEx of US$38–42 billion, largely allocated to advanced technologies and packaging.

During TSMC’s Q1 2025 earnings call, executives addressed geopolitical risks, the impact of China’s H20 ban, and global tariffs. Despite uncertainties, TSMC affirmed strong AI demand, particularly outside China, and reiterated full-year growth and capacity plans. Expansion in the US, Japan, and Europe remains on schedule, with Arizona fabs ramping ahead of plan. Management emphasized fair treatment in subsidies and clarified that US R&D centers will initially support local operations. While margin dilution from overseas expansions is expected, TSMC continues to prioritize sustainable dividends over share buybacks.

Overall, TSM ranks 8th on our list of billionaire Lei Zhang’s stock picks with huge upside potential. While we acknowledge the potential of TSM as an investment, 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 this 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.