AI stocks have been sold off! However, TSMC was named by foreign media as “it’s time to buy now”, revealing the confidence behind its success.

TSMC is the world's largest foundry. (Bloomberg file photo)

[Financial Channel/Comprehensive Report] The volatility of AI concept stocks has intensified recently. Technology companies have continued to increase capital expenditures on AI infrastructure. The market has begun to worry about whether the expansion of AI data centers can be maintained, and semiconductor stocks are also facing selling pressure. However, analysis by foreign media "The Motley Fool" pointed out that although TSMC's stock price is also affected by market sentiment, with strong profit growth, advanced process leadership, and support from AI chip demand, TSMC may still be a relatively defensive investment target among AI stocks.

Foreign media analysis pointed out that TSMC’s third-quarter financial report announced on October 15th was impressive, with revenue increasing by 51% year-on-year to nearly US$47 billion. Since the increase in costs and expenses was lower than revenue, single-quarter net profit increased by 69% year-on-year to nearly US$24 billion. Amid selling pressure on AI-related stocks, TSMC still delivered strong operating results, highlighting its important position in the AI ​​chip supply chain.

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The report pointed out that in addition to ASML, a major semiconductor equipment manufacturer, TSMC can be said to be one of the most advantageous companies in the AI hardware industry. According to TrendForce data, TSMC controls nearly 73% of the foundry market and is also a dominant player in the field of advanced chip manufacturing.

As AI models continue to develop, major customers such as NVIDIA and Broadcom still need to develop more advanced chips, and TSMC is an important manufacturer of these chips. Even if the growth rate of the AI ​​industry slows down, related companies are still likely to continue to invest in product research and development, driving demand for chip manufacturing.

However, TSMC’s strong fundamental performance has not completely offset the market’s doubts about the prospects of the AI ​​industry. Recently, large cloud service providers have continued to increase capital expenditures, coupled with rising interest rates, causing investors to re-evaluate the expansion speed of AI data centers and whether related investments can continue to bring sufficient returns, thus dragging down the performance of semiconductor stocks.

Foreign media analysis believes that the AI ​​industry may indeed face the risk of bubble bursting, and its growth rate may slow down or even experience negative growth for a period of time. However, even if the AI ​​industry undergoes a correction, it does not mean that this technology will disappear.

The report took the Internet industry as an example and pointed out that after the Internet bubble burst, related industries continued to develop. A similar situation may also occur in the AI ​​industry. Even if the short-term investment boom subsides, AI technology may continue to evolve, and corporate demand for related chips will not completely disappear.

Under such circumstances, TSMC still has the opportunity to benefit from the continued launch of new products by major customers and the demand for more advanced chips. In other words, even if the short-term growth of the AI ​​industry is not as good as market expectations, TSMC may still maintain a certain source of revenue by virtue of its position in the chip manufacturing field.

In addition, despite TSMC's rapid development, its stock price still trades at a price-to-earnings ratio of about 30 times. While the company has begun producing more chips at U.S. foundries, geopolitical risks from China's annexation of Taiwan still put some pressure on its valuation.

However, the company's price-to-earnings ratio is low given its rapid profit growth; and given China's reliance on TSMC's foundries, the company is unlikely to take any action that could disrupt the chip supply chain.

As investment in the AI ​​industry becomes uncertain, TSMC is fully prepared to provide security and growth opportunities. To be sure, an industry slowdown could take a toll on the company, and it's located in a more dangerous part of the world.

Still, AI is likely to become a part of our lives, which means any downturn in AI is likely to be temporary. Additionally, TSMC's major customers will continue to innovate even as AI activity slows, meaning the company will almost certainly continue to generate revenue from artificial intelligence.

So even amid geopolitical uncertainty, it could be a top AI chip stock to buy, and one that will help protect and grow investors' wealth over time.

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