Many AI Stocks Are Running Hot. But I'd Have No Problem Putting $1,000 Toward This One Right Now.

Most artificial intelligence (AI) stocks have skyrocketed over the past several years, helping to push the Nasdaq-100, which is dominated by tech stocks, up more than 100% over the past three years.

While many of the returns are warranted, as tech companies have seen their sales and earnings grow quickly over this period, some AI stocks are running hot right now, and not all have the financial growth to justify their rapid share price gains.

Still, some companies, like Taiwan Semiconductor Manufacturing (NYSE: TSM), also known as TSMC, are experiencing rapid sales and earnings growth, benefiting from competitive advantages in the AI market.

Here's why I'd have no problem putting $1,000 toward the stock right now.

Image source: Getty Images.

Taiwan Semiconductor is in a manufacturing league of its own

When most people talk about AI stocks, they're talking about software companies building AI models or services that are built on top of those models. Or they focus on processor companies like Nvidia that design their own AI chips.

But TSMC doesn't do any of those things. Instead, the company has the very straightforward task of manufacturing the processors. Someone has to actually make the AI processors that go into servers, right? And no one does it better than TSMC.

The company's semiconductor manufacturing plants produce 70% of all global processors. Think for a moment of all the things in the world that have processors in them -- from cars to mobile devices and computer servers -- and you'll start to understand just how important this market dominance is.

But it gets even better. Taiwan Semiconductor also produces some of the most advanced processors ever made, and its rivals are having a very difficult time keeping up.

The company pours billions of dollars into developing complex manufacturing processes for advanced chips like its 3- and 4-nanometer processors -- and the result is that TSMC has an estimated 90% market share for advanced processors.

And guess what type of semiconductors are in high demand right now, as AI takes over every tech segment? That's right, advanced processors like TSMC's 3- and 4-nanometer chips.

The company's sales and earnings growth are impressive

Having a dominant position in any market doesn't mean a whole lot if you don't know how to make money from that lead.

But Taiwan Semiconductor does.

In the first quarter of 2026, sales rose 41% to $35 billion, while net income increased 58% to $18.1 billion. These results follow a strong growth trend from the company, building on its 32% sales increase to $122 billion and 46% net income increase to $55 billion in 2025.

This is the opposite of an AI company's share price running ahead of its sales and earnings growth. TSMC's shares are up 323% over the past three years, and its gains have come from its strong position in the AI chip manufacturing space and its ability to convert that position into tangible results for its top and bottom lines.

And the company's management believes more growth is on the way, with sales estimated to rise 30% in 2026 compared to last year.

Why I'd feel comfortable putting $1,000 toward TSMC

I know there's a lot of uncertainty in the market. Many investors are trying to navigate geopolitical uncertainties, understand what's happening in the labor market, gauge inflation's impact on the economy, and factor in a dozen other economic uncertainties.

But one thing that has become crystal clear over the past several years is that artificial intelligence is here to stay, and it's causing a major strategy shift among nearly all technology companies.

While the past few decades were dominated by software, AI is highly dependent on advanced hardware. The best models need high-end processors and all of the major tech giants -- Amazon, Meta Platforms, Alphabet, Microsoft, etc. -- can't get enough of them.

No one knows when this influx of processor demand will end. And even when the biggest data center spending sprees slow down, that doesn't mean demand for advanced processors will dry up. Tech companies will likely need to continue upgrading their hardware in the coming years to stay competitive.

With TSMC's lead in manufacturing and the first innings of AI just getting underway, I think the company is well-positioned to benefit for years to come.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.