1 Top Artificial Intelligence (AI) Semiconductor Stock to Buy Hand Over Fist Before Oct. 17

Artificial intelligence (AI) has played a central role in lifting semiconductor stocks over the past couple of years, which is evident from the tremendous 131% spike in the PHLX Semiconductor Sector index during this period. The good part is that the proliferation of this technology is set to drive stronger growth in this market, as AI adoption moves from data centers to edge devices such as smartphones, personal computers (PCs), and automotive applications, among others.

For instance, the market for chips used in smartphones is expected to jump from $104 billion in 2023 to $146 billion next year. PC semiconductor spending, on the other hand, could jump to $107 billion in 2025 from $89 billion last year, while automotive market chip spending is forecast to jump to $104 billion next year from $79 billion last year. Meanwhile, spending on semiconductors deployed in AI servers and data centers is set to jump from $78 billion in 2023 to $136 billion next year.

For investors looking to capitalize on all these fast-growing semiconductor end markets that have received a big boost thanks to AI, Taiwan Semiconductor Manufacturing (NYSE: TSM), popularly known as TSMC, seems like an ideal bet.

The foundry giant serves all the verticals discussed, and the latest news from the company reinforces the fact that AI is turning out to be a solid growth driver for the company. Let's look at the reasons why.

TSMC is on track to deliver yet another terrific quarterly report

TSMC has just released its sales data for September, and the company has reported an impressive year-over-year increase of almost 40% in its monthly revenue to 251.8 billion New Taiwan (NT) Dollars. If we add the monthly revenue for July, August, and September, TSMC's Q3 revenue would come in at almost 760 billion NT Dollars, an impressive jump of 39% from the same period last year.

That number is higher than analysts' Q3 revenue estimates of 748 billion NT Dollars. So, TSMC seems set to exceed Wall Street's expectations when it releases its third-quarter results on Oct. 17. Analysts have been forecasting $1.80 per share in earnings from the company, a jump of 40% from the same period last year, but the better-than-expected revenue growth is likely to translate into stronger bottom-line gains.

Another thing worth noting is that TSMC's revenue in the first nine months of 2024 increased by 32% from the same period last year. This means TSMC is well on course to outpace the 26% revenue growth to $87.2 billion that analysts are expecting the company to deliver in 2024. More importantly, TSMC is expected to sustain healthy growth levels over the next couple of years as well.