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The more subtle aspect from the financial picture above is Taiwan Semi’s expanding profitability profile. Given its near-70% market share, TSMC is able to command enormous pricing power relative to competitors like Intel or Samsung.

Against this backdrop, Taiwan Semi’s gross margin is widening — with excess cash flowing straight to the bottom line. The company is making the most of this new wave of capital by expanding its geographic footprint — building additional foundries in Arizona, Germany, and Japan.

At the moment, TSMC boasts a forward price-to-earnings (P/E) multiple of 28.4 — hovering near its highest level during the AI revolution. If you were to base your investment decision purely off of this metric, you may think Taiwan Semi is overvalued.

Smart investors understand that TSMC’s premium valuation could be warranted, though. McKinsey & Company is forecasting AI infrastructure to be a $7 trillion market through 2030 — with the majority of spend allocated toward refining AI workloads.

In essence, building out AI-equipped data centers is expected to accelerate throughout the rest of the decade as training and inferencing models becomes more sophisticated and demanding. This is great news for TSMC as it paves the way for long-run visibility across the business.

The AI infrastructure chapter is still in its early innings. Over the course of the next several years, Taiwan Semi is positioned to benefit from the secular tailwind of rising investment in infrastructure both domestically and abroad.

Taking this one step further, physical applications such as autonomous systems and robotics are yet to be deployed in a commercial sense. Looking beyond into the 2030s, these use cases are expected to drive additional trillions in economic value.

Should they achieve some form of adoption and set the stage for the next wave of AI, Taiwan Semi has the potential to benefit immensely beyond where AI stands today — building large language models (LLMs) and other software-based applications.

When you consider the bigger picture and begin to think longer-term, TSMC’s growth potential relative to its valuation looks compelling. So while the stock may not appear dirt cheap at first glance, I think there is ample room for meaningful valuation expansion over the course of the next decade — making the stock a no-brainer buy right now in my eyes.

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Adam Spatacco has positions in Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Intel, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

What Is the Best Artificial Intelligence (AI) Stock to Hold for the Next 10 Years? was originally published by The Motley Fool