Two Top Investment Choices: Taiwan Semiconductor and Amazon

Overview of Investment Opportunities

Investing $1,000 today can be daunting, but two notable options stand out: Taiwan Semiconductor (NYSE: TSM) and Amazon (NASDAQ: AMZN).

Both companies present low-risk opportunities with high long-term return potential.

1. Taiwan Semiconductor: Capitalizing on AI Demand

Taiwan Semiconductor, often called TSMC, produces semiconductors for major tech companies. An impressive 85% of semiconductor prototypes come from its platform.

The company is currently experiencing high demand for chips vital for artificial intelligence (AI) applications. Its partnerships, particularly with Nvidia, contribute to its revenue growth.

Since going public in 1994, TSMC has achieved a compound annual growth rate (CAGR) of 18.2%. It aims for closer to 20% growth through 2029. In the first quarter of 2025, revenue surged by 35%, while gross margins stood at 58.8%—aligning with its targets.

Despite plans to expand manufacturing overseas, TSMC is investing $100 billion in an Arizona facility to enhance service for U.S. customers. While gross margins may temporarily decrease, they expect improved operational efficiency and cost reduction in the long-term.

Management anticipates demand for TSMC’s chips to double by 2025, fueled by AI-focused data centers. The company sees long-term growth prospects remaining strong despite current tariff pressures, and it also distributes a growing dividend.

2. Amazon: Leading in AI Innovations

AWS (Amazon Web Services) is driving Amazon’s growth, spurred by a $100 billion investment in generative AI this year. The company provides a wide array of AI tools for developers and small businesses.

In addition to using technology from other chipmakers, Amazon is developing its own chips to meet cost-sensitive developer needs. Its managed service, Bedrock, facilitates affordable AI app creation.

Amazon has launched over 1,000 AI applications across various sectors, enhancing efficiencies in product delivery and targeted advertising.

CEO Andy Jassy affirmed the company’s commitment to innovating customer experiences through AI during the recent earnings call.

AWS retains a dominant market position with 30% share, significantly ahead of Microsoft. As the top U.S. e-commerce retailer with about 40% market share, Amazon generates substantial revenue through online sales and advertising, contributing to robust growth.

Investment Considerations for TSMC

Before investing in TSMC, note that it was not listed among the top 10 recommended stocks by the editorial team. They suggest alternative stocks that may provide substantial returns.

For instance, investments in Netflix and Nvidia upon their recommendations in 2004 and 2005 would have yielded significant profits, showcasing potential opportunities in the market.

The Stock Advisor program boasts impressive average returns compared to overall market performance.

Note: The author, Jennifer Saibil, does not hold positions in the mentioned stocks. The Motley Fool recommends Amazon, Microsoft, Nvidia, and Taiwan Semiconductor among others.

The views expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.