Why TSMC Remains the Best Chip Maker Stock to Watch as 2026 Unfolds

The Unmatched Foundry Powerhouse

When it comes to the semiconductor industry, one company stands head and shoulders above the competition: Taiwan Semiconductor Manufacturing (TSMC). The numbers tell a compelling story. With a commanding 72% market share in the global foundry sector by the end of Q3, TSMC’s nearest rival Samsung struggles at just 7%. This isn’t dominance by a slight margin—it’s an overwhelming lead.

What makes this position even more remarkable is that TSMC has actually expanded its footprint during the AI boom. Mid-2024 saw the company holding 65% of the market. In just a few quarters, during a period of explosive demand for AI chips, TSMC managed to pull away further. The reason is straightforward: when billions of dollars flow into AI infrastructure, companies have nowhere else to turn. TSMC’s scale, cutting-edge equipment, and proprietary manufacturing processes are simply unmatched.

The Nvidia Factor: A Catalyst for Sustained Growth

Here’s where things get interesting for investors considering the best chip maker stocks to buy right now. Nvidia, the undisputed leader in AI chips, relies heavily on TSMC for manufacturing its most advanced processors. The Hopper and Blackwell architectures were built at TSMC’s fabs. Now, the next-generation Rubin architecture is coming in 2026, and it will be manufactured using TSMC’s cutting-edge 3-nanometer process.

Nvidia’s reported $500 billion order backlog paints a vivid picture of the sustained demand ahead. With $187 billion in trailing twelve-month revenue, the company is positioned for years of continued momentum. As these massive orders flow through TSMC’s production lines, the foundry company stands to benefit enormously. Nvidia has now challenged Apple as TSMC’s largest customer—a testament to the AI chip cycle’s intensity.

Valuation: Expensive on Face Value, Cheap in Context

TSMC’s stock soared more than 50% in 2025, yet the valuation doesn’t scream “overheated.” Trading at roughly 30 times forward earnings estimates, the stock might appear pricey at first glance. However, context matters. Analysts project TSMC will grow earnings by approximately 29% annually over the next three to five years—a robust growth rate for such a large company.

The PEG ratio (price-to-earnings-to-growth) tells the real story. At around 1.0, TSMC signals exceptional value. For comparison, many investors accept PEG ratios of 2.0 to 2.5 for quality companies. TSMC’s superior operational excellence, unrivaled market position, and the mission-critical nature of its role in the AI infrastructure buildout justify paying a premium. Yet with a PEG ratio this attractive, investors are getting that premium at a discount.

The Investment Case Going Forward

TSMC isn’t just riding the AI wave—it’s enabling it. Every data center, every GPU, every advanced chip needs foundry services, and TSMC controls the lion’s share of that ecosystem. Unless there’s an unexpected and dramatic reversal in AI spending (unlikely given current trends), the company’s revenue and earnings should continue on their upward trajectory.

For those hunting the best chip maker stocks to consider, TSMC combines three qualities that rarely coexist: dominant market position, secular growth drivers, and reasonable valuation. With Nvidia’s backlog feeding orders into TSMC’s fabs throughout 2026 and beyond, the foundry’s business momentum appears sustainable. Even if growth moderates slightly from analyst expectations, the company’s structural advantages provide a solid floor for returns, with meaningful upside potential still available for long-term investors.