We recently published a list of the 15 Best Growth Stocks to Buy for the Next 3 Years. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM) stands against other growth stocks to buy for the next 3 years.
On April 29, Dan Ives of Wedbush Securities joined ‘Power Lunch’ on CNBC to discuss his outlook for the tech sector and expressed that tariffs aren’t stopping the AI revolution. According to Ives, the critical question for the sector was whether spending, particularly CapEx, was being maintained. He expressed confidence that CapEx was holding up and predicted that the forthcoming results from big tech companies would serve more as a confidence booster for the market, rather than fueling the existing fears. As some investors are of the idea that concerns about a potential soft patch in the economy remain, there’s a preference for safer investments in insurance and other stable sectors, rather than big tech. However, Ives acknowledged that while uncertainty had been prevalent in recent weeks, his own survey work and field research indicate that AI-related spending stays strong. He noted that, while there were areas of the cloud sector where spending was accelerating, the overall uncertainty would likely result in broad guidance ranges from companies.
Michael Darda, the Managing Director, Chief Economist, and Macrostrategist at ROTH, also believes that AI would generate solid returns in the future. Ives agreed with Darda’s assessment and stated that enterprises were seeing similar advancements and could not afford to leave their AI projects behind without the risk of consequently falling behind. He also pointed out that for companies like those in the MAG7, the AI revolution is a central theme, which is why challenges brought forward by tariffs would not impact the AI revolution as much. Darda changed his outlook from bearish to bullish on tech and AI recently due to his personal experience with AI tools, which he felt had improved over the past year.
Dan Ives reiterated that, despite the uncertainty created by tariffs, the demand for software remained a safety blanket, and spending by hyperscale companies is expected to continue.
Our Methodology
We sifted through financial media reports to compile a list of the top growth stocks to buy for the next 3 years. We then selected 15 stocks with a 3-year revenue compound annual growth rate of over 20%. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024, which was sourced from Insider Monkey’s database.
Why are we interested in 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).
Is Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM) the Best Growth Stock to Buy for the Next 3 Years?
A close-up of a complex network of integrated circuits used in logic semiconductors.
Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM) manufactures, packages, tests, and sells ICs and other semiconductor devices. It offers a range of wafer fabrication processes, such as processes to manufacture complementary metal-oxide-semiconductor logic, mixed-signal, radio frequency, embedded memory, and others.
In FQ1 2025, HPC made 59% of TSMC’s total revenue, which totaled $25.78 billion and improved by 41.40% year-over-year. This HPC revenue itself improved by 7% sequentially, which was driven by the demand for AI-related applications. To support this growth in AI and HPC, TSMC is making investments in advanced packaging technologies, particularly CoWoS. TSMC expects to 2x its CoWoS capacity by 2025. Notably, the shipments of 3nm made up for 22% of total wafer revenue, and 5nm for 36%.
On April 21, Barclays analyst Simon Coles lowered the price target on the TSMC to $215 from $255 while keeping an Overweight rating. According to the analysts, the company’s shares are already pricing in a slowdown. From 2024 to 2029, Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM) expects revenue CAGR to approach 20%.
The company’s results and guidance showcased strong AI chip demand, which is why Sands Capital Technology Innovators Fund stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q4 2024 investor letter:
“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) third-quarter 2024 results and guidance showcased strong continued demand for artificial intelligence (AI) chips. Revenue increased by 29 percent, and earnings saw a 54 percent rise year-over-year. Gross margins were at their highest since 2022, bolstered by price hikes and record utilization at both the 3 nanometer (nm) and 5nm nodes. TSMC’s full-year revenue outlook was revised upward from 25 percent to 30 percent growth. The company also anticipates higher capital expenditure in 2025, a leading indicator for revenue.
Overall, TSM ranks 2nd on our list of the best growth stocks to buy for the next 3 years. While we acknowledge the growth potential of TSM, 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 the cheapest AI stock.
