Microsoft CEO Satya Nadella said last year that 30% of Microsoft’s code is written by artificial intelligence (AI). I can only imagine that number is higher now.
Humans still need to maintain quality, a fact proven by Microsoft appointing Charlie Bell, the former head of the company’s security business, who now focuses exclusively on maintaining the quality of the company’s products. He reports directly to Nadella.
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Microsoft clearly has no plans to reduce the amount of its code written by AI. Nadella himself said it’s growing steadily, and CTO Kevin Scott predicted that by 2030, 95% of the company’s code will be written by AI.
With that in mind, what’s the best way to make AI a permanent part of the IT industry? By my math, one of the best single-player ways to play Taiwan Semiconductor Manufacturing (NYSE: TSM ).
Image source: Getty Images.
Taiwan is where a full 60% of the world’s semiconductor chips are produced.
But the country’s footprint is even bigger than that because 90% of the world’s advanced semiconductor chips, those 7 nanometers (nm) or smaller, are produced in Taiwan.
And these are the chips you need to run the high-end AI programs Microsoft and others use to write their code.
Microsoft uses many Nvidia Hardware to run your AI. So does pretty much everyone else. IOT Analytics reports that Nvidia controls 92% of the data center GPU market. It’s close competition Advanced Micro Devices At 4%.
But these Nvidia graphics processor units (GPUs) are manufactured by Taiwan Semiconductor. So are its competitors AMD, with Appl, Broadcom, Qualcomm and others, either in whole or in part.
In fact, Nvidia’s best Blackwell chip is manufactured at a Taiwanese semiconductor factory in Arizona.
The semiconductor chip market, and by extension the AI data center hardware market, simply does not exist without Taiwan Semiconductor, which does not design any of the chips it manufactures.
Taiwan Semiconductor is a “Pure Foundry” company. All it does is produce chips in the contract. But it is completely dominant in the space, with a 72% market share by Q3 2025. Samsung is in second place with 7%.
You’ve heard of the pick and shovel game, I’m sure. But Taiwan Semiconductor is of the A pick-and-shovel game for the AI industry and the tech industry at large.
And the company is expanding its influence beyond Taiwan to build its global dominance. The semiconductor factory in Arizona I mentioned is being expanded by Taiwan Semiconductor to produce more chips in the US, and eventually the company plans to have six factories in the state and two advanced packaging facilities. The Taiwanese semiconductor company also has plans to expand its manufacturing footprint in Japan and Germany.
And all this expansion hasn’t come at the expense of the company’s bottom line, which remains surprisingly healthy.
Currently, the Taiwanese semiconductor company is one of only two non-U.S. companies with a market capitalization of $1 trillion or more. Its recent results reflect its size and influence well.
The company’s revenue is expected to reach $122.4 billion in 2025, an increase of 35.9% over 2024. Diluted earnings per share (EPS) grew 46.4%. Taiwan Semiconductor also maintains excellent profitability with a net profit margin of 45%.
The company projects revenue growth of 30% to 2026 and a compound annual growth rate (CAGR) of 25% to 2029.
Finally, the Taiwanese semiconductor is currently trading at a price-to-earnings-to-growth (PEG) ratio of 1.2, which means it’s much closer to fair value than future earnings estimates.
Put it all together, and you have a strong long-term buy-and-hold possibility of a one-trick pick-and-shovel game of the entire global tech industry.
And if Microsoft wants to generate 95% of its code with AI by 2030, it will need a lot more hardware, which Taiwan Semiconductor will happily produce, and in all likelihood continue the growth spurt.
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James Hires has no position in any of the listed stocks. The Motley Fool owns and recommends positions in Advanced Micro Devices, Apple, Microsoft, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing and is short shares of Apple. The Motley Fool recommends Broadcom. Motley Fool has a disclosure policy.
“All software is rewritten,” says Satya Nadella. Here are 1 of the best artificial intelligence (AI) stocks for 2026. Originally published by Motley Fool.
