How much conviction do AI investors have? We’re about to find out. As the AI rally faces its first major test, with tech stocks experiencing their steepest two-day drop this week, a fierce debate has emerged: Has the AI trade finally reached its peak, or is this merely a bump to greater heights? For some bold investors, the answer is clear — the recent drawdown is an opportunity to double down on a trade that has underpinned a rise in global equities.

All AI roads lead back to TSMC: Investors are increasingly skeptical about whether the billions invested by major tech firms in AI infrastructure will lead to meaningful returns. And one company raking in those billions is Taiwan Semiconductor Manufacturing Co.TSM

— the world’s largest contract chipmaker. This week, TSMC reported that revenue surged 45% in July, bolstered by insatiable demand for AI chips from companies like NvidiaNVDA

and Advanced Micro DevicesAMD

.

• High-performance computing, led by AI, contributed 52% of TSMC’s revenue last quarter — the first time it has accounted for more than half.
• This year,TSM
  is up over 60% already, despite a recent pullback in AI shares that sent the iShares Semiconductor ETFSOXX
  down over 20% since early July.

Unwavering Confidence

Despite the recent plunge, which saw Asia’s tech stocks record their steepest-ever two-day drop, money managers in the region remain steadfast in their conviction. For them, the long-term prospects for AI are undimmed, and the sell-off presents a chance to scoop up shares of TSMC, Samsung ElectronicsSSNLF

, and SK Hynix at a discount.

• These three semiconductor giants are expected to report earnings growth of 26% to 55% next year, compared with an average of just 12% for MSCI Asia Pacific Index members.
• “TSMC is the dominant foundry, so we think they are in a pretty solid position,” according to Lazard Asset Management’s Ganesh Ramachandran, who holds TSMC as their largest position.

Moment seized: As the sell-off reverberated through global markets, savvy investors saw a rare opportunity to snap up AI and tech stocks at bargain prices. From BlackRockBLK

to UBSUBS

, investment managers pounced on the chance to buy into stocks that had been on a tear for most of the year.

Much of the opportunistic buying focused on megacap tech stocks, with chipmaker Nvidia and others experiencing sharp falls before rebounding slightly. The recent turbulence in the AI trade is a reminder that even the most promising investments come with risks. Yet, for some global investors, the long-term potential of AI is simply too compelling to ignore.