📝 Executive Summary
It's not easy forecasting stock winners. I wrote a series of articles at the beginning of the year forecasting which "Magnificent Seven" stock would be the best to buy this year. My top pick, Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), is up only 7% so far this year, while my bottom pick, Apple (NASDAQ: AAPL), is up nearly 20%. Nvidia (NASDAQ: NVDA) is once again leading the way, and there's a lot to love about Jensen Huang's company. The most recent earnings report showed revenue of $96.2 billion, up a whopping 106% from a year ago. And the company's next-generation Vera Rubin processors are expected to start generating massive profits soon, as Nvidia calls them the fastest-ramping product in company history. Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » But Nvidia doesn't have the entire field to itself. It's getting more competition. Alphabet has chips called Tensor Processing Units, its in-house alternative to Nvidia's customized to run on Google Cloud, and is now selling TPU capacity. Amazon's (NASDAQ: AMZN) custom silicon business is also growing, and recently exceeded a $25 billion annual run rate -- its Trainium and Inferentia chips are purpose-built to run on Amazon Web Services' cloud. Meta Platforms (NASDAQ: META), Microsoft (NASDAQ: MSFT), and Tesla (NASDAQ: TSLA) are all Nvidia customers. Apple also designs its own chips and has a completely different artificial intelligence strategy than other Magnificent Seven members -- it's focused on embedding AI applications and intelligence into its operating systems. But these companies have one major thing in common -- they are all customers of another trillion-dollar publicly traded company. And that's why I think that Taiwan Semiconductor Manufacturing (NYSE: TSM), which is the biggest chip foundry in the world, is a better buy today than any single member of the Magnificent Seven cohort. Nvidia and Apple are the two largest companies in the world. And both of them are major TSMC customers. Apple is geared to buy more than 100 million advanced chips from TSMC's Arizona foundry this year. And Huang, the CEO of Nvidia, has gushed about TSMC, at one point calling it "one of the greatest companies in the history of humanity." In another interview, Huang told reporters, "You can't overstate the magic that is TSMC." Other Magnificent Seven companies are also using TSMC. Meta Platforms, which is working to create "superintelligence" and free personal AI assistants, is designing custom AI chips with Broadcom but using TSMC as the foundry. TSMC also manufactures Amazon's custom silicon and provides the silicon Alphabet uses to build its TPUs, in conjunction with Broadcom. TSMC CEO C.C. Wei talked about the increase in agentic AI and how that emerging technology is leading to a new demand for central processing units -- CPUs -- in data centers. He said: "The emergence of agentic AI is leading to a resurgence in the role of CPUs in AI data centers, which drive more silicon demand in addition to AI accelerators. We believe this is positive for TSMC, as no matter what CPU approach is taken, whether it's a x86, Arm-based, or RISC-V architecture, they are almost all TSMC's customers." If you needed another reason to like TSMC, just look at the year-to-date performance. TSMC is outperforming every member of the Magnificent Seven this year, with a gain of nearly 36%. And over the last 12 months, it's up a whopping 78% -- again, outperforming every member of the Magnificent Seven. Revenue in the second quarter was $40.2 billion, up 33.7% from a year ago. Gross margin was a whopping 67.7%, and the company's net profit margin was an impressive 55.6%. And I expect those numbers to get even better. TSMC began producing chips using its new 2-nanometer process technology for the first time in the second quarter. TSMC said those chips, which offer higher density and energy efficiency, accounted for only 3% of TSMC's wafer revenue in Q2, but that number will increase as sales increase. TSMC is also increasing its investments in the U.S., having recently announced another $100 billion in construction for its Arizona foundries. That increases TSMC's total investment in its Arizona site to $265 billion. TSMC is already outperforming the Magnificent Seven this year as investors recognize its unique role in the expansion of AI. And there's every reason to believe that will continue, particularly as members of the Magnificent Seven turn to TSMC to provide the silicon or manufacture their chips. With the rollout of 2nm technology and a dominant position in the foundry market, TSMC is in a great position to continue to provide outsize revenue and profits for shareholders. Before you buy stock in Taiwan Semiconductor Manufacturing, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn't one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $446,157!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,377,357!* That performance is why people listen. With a track record of beating the S&P 500 by nearly 5x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of September 3, 2026. Patrick Sanders has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Broadcom, Meta Platforms, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool has a disclosure policy. Opinion: TSMC Is a Better Buy Than Any of the "Magnificent Seven" Stocks Right Now was originally published by The Motley Fool