This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Over the last several weeks, technology companies have reported earnings for the fourth quarter and full calendar year for 2024. Among the biggest influencers in artificial intelligence (AI) are the "Magnificent Seven" companies: Nvidia, Microsoft, Meta Platforms, Amazon, Alphabet, Tesla, and Apple.
Within this cohort, Microsoft, Amazon, and Alphabet are forecast to spend nearly a quarter-trillion dollars on AI infrastructure just this year. While that's quite a hefty price tag, I don't find this spending out of the ordinary. Over the last few years, each of these tech titans have plowed billions into leading AI start-ups including OpenAI and Anthropic, as well as invested significant capital into data centers and custom chipware.
One member of the Magnificent Seven that has been suspiciously quiet throughout the AI revolution is Apple. Well, that just changed. The iPhone maker recently announced that it plans to invest $500 billion over the next four years -- allocated across areas including manufacturing, silicon engineering, and AI.
Below, I'll assess the details of Apple's massive AI initiative and make the case for why investors in Taiwan Semiconductor Manufacturing Company (NYSE: TSM) should be particularly excited.
Apple's $500 billion infrastructure investment
There are multiple components to Apple's $500 billion commitment to U.S. infrastructure.
As part of the initiative, Apple will be constructing a manufacturing facility in Houston, Texas to house servers. The primary reason to build this server unit is to further support infrastructure around Apple Intelligence -- the company's AI system equipped with features from ChatGPT.
Another component of Apple's plan includes bolstering manufacturing spend for advanced silicon, specifically in Arizona. This is where TSMC investors might want to pay attention.
How does Apple's investment benefit TSMC?
Over the last several years, TSMC has built advanced fabrication facilities in Phoenix, AZ as part of a $65 billion AI chip initiative. According to Apple, the company is the largest customer of TSMC's Fab 21 plant in Phoenix.
Just days after Apple announced its plans to invest $500 billion into the U.S., TSMC announced a $100 billion project of its own -- whereby the company plans to build new fabrication and packaging facilities.
Given Apple is already an important customer of TSMC (to say the least), I'm encouraged by both companies' commitments to bolster their infrastructure in the U.S. I see Apple's ambitions in manufacturing and silicon engineering as an important step in the company's ongoing efforts to compete in an intense AI realm. Moreover, I think TSMC's interest in expanding its U.S. footprint should bode well for the company's future growth prospects -- particularly from leading U.S. AI players such as Apple.
Is TSMC stock a buy right now?
As of this writing (March 14), shares of TSMC have fallen by about 12% this year -- underperforming both the S&P 500 and Nasdaq Composite. I think that the declines seen in TSMC stock are primarily a result of more macro trends.
What I mean by that is over the last couple of weeks the capital markets have seen abnormal levels of volatility, thanks in large part to uncertainties surrounding President Trump's tariff policies. As a result, technology stocks -- which have largely been carrying lofty valuations for the last two years -- have started to see some oversized selling activity, and I think TSMC has simply been dragged into this dynamic.
TSM PE Ratio (Forward) data by YCharts
I think the ongoing selling is a prime opportunity to buy the dip in TSMC stock right now. As the chart above illustrates, the sell-off in TSMC has led to significant contraction in valuation. Right now, shares of TSMC trade at a forward price-to-earnings (P/E) multiple of just 19.1 -- nearly the lowest level in a year.
The way I see it, the sell-off in TSMC stock is not correlated to any fundamental changes in the company's operation. In fact, recent results published by the company indicate that demand trends remain incredibly robust. I think this is a rare instance in which a growth stock is experiencing a prolonged period of cooling off despite a lucrative combination of strong current growth and an encouraging long-term outlook.
I would not be surprised to see TSMC's sales and profit growth climb even higher as Apple's infrastructure investments begin to take shape. What's even better is that Apple's $500 billion investment is a four-year-long project, meaning TSMC should be in a position to witness consistent demand for one of the world's largest AI players.
In my eyes, TSMC is trading at a bargain price point and remains a compelling long-term opportunity for AI investors.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
