Billionaire investor David Tepper significantly increased his investment in Taiwan Semiconductor Manufacturing (TSMC), a critical AI chipmaker, while reducing holdings in Broadcom and Meta Platforms, signaling a strong bet on the future of AI infrastructure.

Investment Firm Shifts Focus to AI Chip Manufacturing

Appaloosa Management, the investment firm founded by billionaire investor David Tepper, significantly increased its stake in Taiwan Semiconductor Manufacturing (TSMC), a pivotal player in the artificial intelligence (AI) chip sector, during the second quarter of 2025. This strategic reallocation of capital suggests a heightened focus on the foundational hardware infrastructure driving the ongoing AI revolution.

The Investment in Detail

During Q2 2025, Appaloosa Management expanded its holding in TSMC (NYSE: TSM) by 279.6%, adding 755,000 shares to its portfolio. Concurrently, the firm divested its entire position in Broadcom (NASDAQ: AVGO) and reduced its stake in Meta Platforms (NASDAQ: META) by 27%. This decisive shift underscores Tepper's conviction in companies that control critical segments of the chip supply chain.

TSMC reported robust financial performance for Q2 2025, with revenue climbing 54% year-over-year to $30.1 billion. The company's operating margin improved by 40 basis points to 49.6%. For the full fiscal year 2025, TSMC anticipates approximately 30% revenue growth in U.S. dollar terms. A significant driver of this growth is the demand for high-performance computing chips, which accounted for nearly 60% of the company's sales. Demand for TSMC's advanced 3nm and 5nm chips, essential for cutting-edge AI applications, currently far outstrips available supply, providing the company with substantial pricing power.

Analysis of Market Reaction and Strategic Rationale

David Tepper's substantial investment in TSMC reflects a broader market recognition: the supply of advanced chips is a critical bottleneck in the expansion of AI infrastructure. By concentrating capital in TSMC, Tepper is making a significant wager on the foundational role of semiconductor foundries. Companies such as Nvidia (NASDAQ: NVDA), Advanced Micro Devices (NASDAQ: AMD), Apple (NASDAQ: AAPL), and Alphabet (NASDAQ: GOOG) are highly reliant on TSMC's manufacturing capabilities to scale their AI models and data centers. This strategic pivot highlights a belief that enterprises controlling essential hardware components will continue to command strong pricing power and achieve long-term growth in the AI-driven economy.

Despite its market dominance and strong growth prospects, TSMC trades at 23.8 times forward earnings, a valuation that is lower than the median 31.5 multiple observed for the overall technology sector, suggesting a potentially reasonable entry point for investors.

Broader Context and Implications for the Semiconductor Industry

TSMC's preeminent position in the global semiconductor industry is further solidified by its technological leadership and production capacity. The company plans to initiate volume production of its 2nm chips in the second half of 2025, which are expected to offer enhanced speed and power efficiency compared to 3nm nodes. Further advanced nodes, including N2P, A16, and A14, are slated for production through 2028.

TSMC's chairman, C.C. Wei, has asserted the company's unparalleled competitive standing, stating:

"TSMC has no competitors, as nearly all global AI chip customers are under its control."

This sentiment is echoed by industry observations, which highlight struggles faced by competitors like Samsung Electronics and Intel in their respective foundry businesses. While Intel has faced strategic challenges, Samsung's issues are primarily technical, according to industry insiders. TSMC's 3nm and 5nm production lines are reportedly operating at full utilization, underpinning the company's robust revenue forecasts.

AI-related revenues have become a significant growth driver for TSMC, tripling in 2024 and projected to double again in 2025. Management anticipates a 40% annual growth rate for AI revenues over the next five years, underscoring TSMC's central role in the AI supply chain. To meet this escalating demand, the company plans substantial capital expenditures of between $38 billion and $42 billion in 2025, with approximately 70% of this investment allocated to advanced manufacturing processes.

Looking Ahead

The strong demand for AI chips is expected to continue driving TSMC's growth trajectory. The company's aggressive capital expenditure plans and ongoing advancements in process technology, particularly the rollout of 2nm and subsequent nodes, are designed to maintain its lead in the foundry market. Key factors to monitor in the coming quarters will include the progress of its advanced node production, the sustained demand from major AI chip designers, and any shifts in the broader technology investment landscape as the AI sector matures.