Choosing just one stock to hold onto isn’t straightforward. In fact, it’s often considered a poor investment strategy. Still, I believe it can be a valuable exercise for investors to pinpoint what they trust most and adjust their portfolios to reflect that.
In my view, the best stocks to buy and hold are those resilient against disruption and well-positioned in the current market. Taiwan Semiconductor (NYSE: TSM) stands out as a prime example. There are several reasons for this.
Many companies are pouring billions into artificial intelligence, but they’re hitting bumps in creating the necessary infrastructure, particularly regarding data centers. There’s a real shortage of computing power to meet the growing demand. Graphics processing units (GPUs), especially Nvidia’s, have dominated the hardware scene, but their leadership is being called into question.
I think Taiwan Semiconductor, which manufactures chips for numerous computing units, is likely to emerge victorious in the AI landscape. Even though there are competitors, Taiwan Semiconductor possesses superior technology and unmatched production capacity, giving it an edge over others.
Being neutral in the AI race is advantageous. Taiwan Semiconductor is set to thrive as long as capital spending on data centers keeps increasing.
A lot of investors express skepticism about some of Nvidia’s long-term forecasts, yet many of those projections have panned out. Their latest predictions are even bolder, but Nvidia likely has a clearer insight into the market than average retail investors. A report suggests that global data center spending could soar from $3 trillion to $4 trillion by 2030, a considerable leap from the $600 billion anticipated in 2025, with Taiwan Semiconductor being the leading supplier of the chips needed for this expansion.
Known for regularly rolling out new chip technologies, Taiwan Semiconductor is gearing up for 2026 with its new 2-nanometer chip, which boasts impressive improvements that clients have eagerly awaited.
Limited energy availability might hinder AI development. However, there are approaches to mitigate this, including the creation of more energy-efficient hardware. Taiwan Semiconductor has taken on this challenge; its new 2nm chips use 25% to 30% less power than the previous 3nm chips when set to the same speed. These advancements are crucial for the upcoming wave of AI growth, and with even more energy-efficient chips in the pipeline, Taiwan Semiconductor appears ready to provide the advancements necessary for AI hyperscalers.
AI hyperscalers can be pricey investments, but Taiwan Semiconductor defies this trend.
With a projected P/E ratio of 23x in 2026, that premium isn’t too high compared to its competitors. Given the rapid growth anticipated into 2026 and beyond, it’s arguably a worthwhile investment now.
As a central player in the AI sphere, Taiwan Semiconductor provides chips that power many generative AI tools today. Because it still trails its competitors, it won’t have to fear losing its leading position as long as it keeps innovating. Hence, this is my top pick for a stock to buy and hold, and I’m optimistic about its ability to lead the market by 2026.
Before considering an investment in Taiwan Semiconductor Manufacturing, keep these points in mind:
Interestingly, the Motley Fool Stock Advisor team has identified several stocks they believe are among the best 10 stocks to buy now—Taiwan Semiconductor Manufacturing isn’t included in this selection. Still, these picks could yield significant returns in the coming years.
For context, if you invested $1,000 in Netflix when it made it to this list in December 2004, you’d now have about $509,470! And similarly, a $1,000 investment in Nvidia from April 2005 would be worth around $1,167,988!
It’s crucial to note that the average return from the Stock Advisor program is an impressive 991%, especially when contrasted with the S&P 500’s return of 196%. Their recent Top 10 list boasts robust selections within a community of retail investors.
*Stock Advisor returns as of December 22, 2025.
