After years of market-beating returns, chip stocks have endured a difficult year so far, but top tech investor Paul Meeks believes there is still one stock that investors “must own.” The ProShares UltraShort Semiconductors ETF, an inverse ETF that bets against the sector, has returned nearly 30% this year, while the iShares Semiconductor ETF is down 27.4%, highlighting just how bearish the market has turned on the sector. But Meeks remains a fan of chip stocks. “If you think about semiconductors, they are like 21st century gold … They are in every product so I can see why people are entranced with them. And there’s a good reason to be,” Meeks, portfolio manager at Independent Solutions Wealth Management, told CNBC Pro Talks on Wednesday. But he said he would focus on “some of the leading companies,” which are “frankly not always US companies.” His top pick in the sector is Taiwan Semiconductor Manufacturing Company, the world’s biggest chipmaker. “TSMC is the dominant company in what it does. I don’t know if there is any company in technology, even including the FAANGs in the United States, that has a stronger position in such an important market,” he said. “When you invest as a global investor, you must own TSMC at some point,” he added. The chip giant had a standout second quarter, with the company posting record net profit of 237.03 billion Taiwanese dollars ($7.9 billion), up 76.4% from a year ago and ahead of estimates compiled by Refinitiv. The company also delivered a beat on revenue in the second quarter, as it raked in 534.14 billion Taiwanese dollars, a 43.5% jump year-on-year. TSMC has forecast revenue of between $19.8 billion and $20.6 billion in the third quarter — a marked increase from the $14.8 billion in the same period last year. Why TSMC is so important As a foundry for the semiconductor sector, TSMC manufactures chips designed by other companies. Its clients include a host of big tech companies such as Nvidia, Qualcomm and more. TSMC is also Apple’s most important chip supplier. In a sign of the company’s critical role in making the world’s most advanced chips, US House Speaker Nancy Pelosi met with TSMC Chairman Mark Liu on her recent visit to Taiwan. Why Meeks is giving US chip stocks a miss On Tuesday, President Joe Biden passed into law a bipartisan bill to boost US competitiveness with China by investing trillions of dollars in domestic semiconductor manufacturing and scientific research. The Chips and Science Act includes more than $52 billion in subsidies for US companies producing computer chips, as well as billions more in tax credits to spur investment in chip manufacturing. But while Meeks acknowledges that the new piece of legislation will benefit US chip companies in the long run, he is not convinced that the sector will get a significant leg-up in the short-term. “I think it’s a bit naïve to think that their fundamentals will change because of the Chips Act and the building of semiconductor foundries [in the U.S.] because what happens is, even if they start digging dirt today, you won’t see a chip … off these manufacturing line for several years,” he said. “There is quite a bit of time between now and then — before the US becomes not even a major player in worldwide chip production,” Meeks said. Read more Just how strong is the US consumer? Here’s what Wall Street has to say — and the stocks it likes Morningstar’s top US strategist sees headwinds fading — and says these stocks are oversold Thematic investing is back in the spotlight. Citi and others share how to play it He said he would not put Intel at the top of his list, with the company having “lost its mojo.” He believes the company is on the right track in its shift to be an “outsourcer of chips,” but they have “badly blundered” in the meantime. Meeks is also giving Advanced Micro Devices a miss given its exposure to the smartphone and personal computer segments. “As we enter a recession in the US, you know these consumer-oriented tech p roducts get hit the most,” he said. Another stock that Meeks is holding back on is Qualcomm. He said he likes the stock for the long term, but said short-term risks include its “substantial” smartphone exposure and potential for more forecast downgrades.