Prominent hedge fund managers have selected two AI stocks as 2026 favorites, reportedly tied to constraints on TSMC's CoWoS advanced packaging capacity.
The evolution of artificial intelligence has proven to be the most game-changing trend since the proliferation of the internet in the mid-to-late 1990s. This multitrillion-dollar global opportunity is attracting investment capital at an unprecedented pace, and Wall Street's most successful billionaire money managers have taken notice. According to quarterly Form 13F filings, we can see exactly which AI stocks these seasoned investors have been accumulating. What may surprise many is that neither Nvidia, the dominant GPU manufacturer, nor Alphabet ranks as billionaires' favorite AI stock. That distinction belongs to Amazon and Taiwan Semiconductor Manufacturing (TSMC).
A review of top-four holdings across nearly twenty billionaire investors reveals a striking pattern: only two stocks appeared as top-four holdings for at least five billionaires. Amazon qualifies as a number-one holding for David Tepper at Appaloosa and Seth Klarman at Baupost Group, a number-two holding for Chase Coleman at Tiger Global Management and Dan Loeb at Third Point, and a number-four holding for Bill Ackman at Pershing Square. Though Amazon is best known for its dominant e-commerce marketplace, its most impressive recent growth has come from its position as an AI applications powerhouse through Amazon Web Services.
Before the AI revolution, AWS was expanding sales in the high teens. Since AWS integrated generative AI and large language model capabilities, year-over-year growth has accelerated to an 18-quarter high of 37% as of the June-ended quarter. The segment's margins substantially exceed those of Amazon's e-commerce and advertising operations. Despite accounting for less than 21% of net sales through the first half of 2026, AWS generated 60% of the company's operating income.
On the hardware side, billionaire investors have gravitated to contract chip manufacturer Taiwan Semiconductor Manufacturing as their favorite AI infrastructure play. TSMC ranks as a number-one holding for Chase Coleman at Tiger Global Management and Philippe Laffont at Coatue Management, a number-two holding for Stanley Druckenmiller at Duquesne Family Office and Ole Andreas Halvorsen at Viking Global Investors, and a number-three holding for David Tepper at Appaloosa. The capacity of hyperscalers to rapidly expand AI-accelerated data centers depends critically on TSMC's chip-on-wafer-on-substrate (CoWoS) packaging technology, which connects GPUs and high-bandwidth memory to enable rapid data transfers. TSMC has been expanding CoWoS capacity at exceptional speed and has secured future orders at favorable pricing. The company's CoWoS capacity is projected to grow from 675,000 wafers in 2025 to 1.275 million in 2026 and 2.31 million in 2027—a significant upward revision from the previous 1.74 million estimate, reflecting accelerating AI-driven demand.
Beyond its critical role in AI infrastructure, TSMC maintains a diversified manufacturing footprint. The company is essential to central processing unit production and chip manufacturing for smartphones and automobiles. Should an AI bubble form and burst, TSMC has substantial revenue streams outside the sector to stabilize its business.