Taiwan Semiconductor Manufacturing (NYSE: TSM) is the world’s leading semiconductor (chip) foundry. Its foundry business model means it makes chips tailored to its customers’ specific needs, and key partners include Nvidia, Apple, and Advanced Micro Devices.

The stock has been on a roll, up over 200% in the past five years, despite pulling back 25% year to date. And the next five years seem just as promising thanks to its role in the artificial intelligence (AI) pipeline.

To see how vital the company, also known as TSMC, is to AI development, it’s important to work backward, beginning with the end product: AI applications. For AI applications to be effective, they need to be trained using lots (and I do mean lots) of data. This data must be processed and managed in advanced data centers.

A key component of those data centers is the graphics processing unit (GPU), which has fueled Nvidia’s explosive rise to become the world’s third-most valuable company in just a few years. But while Nvidia designs the GPUs, TSMC produces them.

It’s important to note that no other company is making powerful AI chips at the scale and efficiency of TSMC. That’s why the company produces around 90% of the world’s advanced chips. The AI-related demand has paid off for TSMC, too. Last year, its high-performance computing segment (which includes AI chips) grew 58% year over year and made up 51% of its $90.1 in total revenue.

Over the next five years, management expects a mid-40% compound annual growth rate for AI accelerator revenue. Given this bullish outlook, the stock should be in for a good run over the next five years.

Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $461,558!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $578,035!*

Now, it’s worth noting Stock Advisor’s total average return is 730% — a market-crushing outperformance compared to 147% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »