Finance

TSMC’s 2nm Tech: How This Chipmaker Is Powering the AI Revolution and Boosting Your Portfolio

TSMC’s new energy-efficient 2nm tech and strong financials position it as a key AI chip manufacturer.

byAndres Castro

November 16, 2025, 7:51 AM

The TSMC trademark is displayed at the Tainan Science Park in Taiwan. By Jack Hong / Shutterstock.com.

Executive Summary

TSMC is a pivotal beneficiary of the AI megatrend, manufacturing advanced chips for leading AI hardware providers like Nvidia, Broadcom, and AMD.

TSMC’s new 2-nanometer (nm) process technology offers a 25% to 30% reduction in energy consumption compared to 3nm chips, addressing a critical challenge in AI data center expansion.

TSMC reported a 41% year-over-year revenue increase in Q3 and maintains a valuation in line with the S&P 500 despite its rapid growth in the AI sector.

The Story So Far

The global buildout of artificial intelligence (AI) computing infrastructure is driving immense demand for advanced semiconductors, making companies like TSMC critical to the AI supply chain. As the world’s largest chip foundry, TSMC is introducing its new 2-nanometer process technology not only to enhance chip performance but also to address the escalating energy consumption concerns associated with expanding AI data centers.

Why This Matters

TSMC’s launch of energy-efficient 2nm process technology cements its indispensable role in the AI hardware supply chain, enabling the continuous expansion of AI computing infrastructure while crucially mitigating the substantial energy consumption challenges faced by AI data centers. This strategic move, combined with the company’s robust financial performance, positions TSMC as a foundational long-term player in the AI era, potentially offering an attractive investment opportunity despite its already strong growth.

Who Thinks What?

TSMC is strategically introducing new 2-nanometer process technology to enhance energy efficiency and capitalize on the AI megatrend, positioning itself as a crucial beneficiary due to its advanced chip manufacturing capabilities.

AI hardware providers like Nvidia, Broadcom, and AMD are expected to rely on TSMC’s superior manufacturing capabilities for their advanced chips, regardless of which company leads in high-performance GPUs for AI workloads.

Despite TSMC’s rapid growth and pivotal role in the AI sector, the company’s stock trades at a valuation (P/E ratio) approximately in line with the broader market, suggesting it does not currently carry a significant premium.

Taiwan Semiconductor Manufacturing Company (TSMC) is positioned as a significant beneficiary of the artificial intelligence (AI) megatrend, with its advanced chip manufacturing capabilities crucial for the ongoing buildout of AI computing infrastructure. The company is introducing new 2-nanometer (nm) process technology designed to enhance energy efficiency, addressing a growing concern regarding the power consumption of AI data centers. This strategic move, coupled with strong financial performance, places TSMC at the forefront of the semiconductor industry amidst intense AI development.

Market Position in AI Hardware

TSMC, the world’s largest chip foundry, plays a pivotal role in the AI hardware supply chain. Regardless of which companies, such as Nvidia, Broadcom, or AMD, ultimately lead in high-performance graphics processing units (GPUs) for AI workloads, their advanced chips are likely to be manufactured by TSMC. The company’s superior manufacturing capabilities have established it as a dominant force in cutting-edge chip production, a position that appears set to continue with its new process node introduction.

Addressing Energy Consumption Challenges

A significant challenge in the expansion of AI infrastructure is the substantial energy consumption of data centers. TSMC’s new 2nm process node, currently entering production, offers a 25% to 30% reduction in energy consumption when operating at performance levels comparable to its previous 3nm chips. These advancements are expected to enable AI hyperscalers to expand computing capacity while mitigating the corresponding increase in energy usage, a critical factor for grid stability and operational costs.

Financial Performance and Valuation

TSMC reported a 41% year-over-year increase in revenue during the third quarter, measured in U.S. dollars, highlighting its rapid growth within the AI sector. Despite this accelerated growth, the company’s stock trades at a price-to-earnings (P/E) ratio of 29, which is approximately in line with the S&P 500’s P/E of 28. This valuation suggests that TSMC’s stock does not currently carry a significant premium compared to the broader market, even with its strong revenue expansion.

Outlook

With its technological advancements, particularly the energy-efficient 2nm process node, and robust financial performance, TSMC is well-positioned to capitalize on the sustained demand for advanced chips driven by the AI buildout. The company’s foundational role in manufacturing semiconductors for leading AI hardware providers underscores its long-term relevance in the evolving technology landscape.