TSMC and Broadcom: AI Chip Giants Poised to Reclaim Trillion-Dollar Valuations

Watch these 2 chip stocks riding the AI wave

Two major chipmakers, previously crowned with trillion-dollar valuations, have recently slipped from their lofty perches. Taiwan Semiconductor Manufacturing (TSM) and Broadcom (AVGO) are poised to reclaim their spots, fueled by the ever-growing demand for AI. Out of the seven public companies boasting market caps of $1 trillion or more, six are deeply entrenched in the AI arena. Nvidia, Meta Platforms, Apple, Microsoft, Amazon, and Alphabet have all ridden the AI wave. However, TSMC and Broadcom after reaching that height have experienced setbacks. Broadcom, a major player in network equipment for data centers and security solutions, is also reaping the rewards of the custom silicon boom. Historically, Broadcom's stock dips have been brief, followed by sharp rebounds. The current downturn seems more tied to macroeconomic anxieties than to any company-specific issues. The AI hardware narrative has largely focused on GPUs from Nvidia and AMD. Still, players like Microsoft, Amazon, Alphabet, and Meta will be spending big. They are projected to pour over $320 billion into AI infrastructure this year alone. Broadcom CEO Hock Tan revealed on the company's recent earnings call that "two additional hyperscalers have selected Broadcom to develop custom accelerators to train their next-generation frontier models." Tesla stock has crashed 44%: Can it ever recover? TSMC, a titan in the third-party foundry space, specializes in the intricate chipmaking processes that power the innovations of giants like Nvidia and Advanced Micro Devices. Thanks to a surge in demand, high-end graphics processing units (GPUs) used in data centers saw an increase of revenue. Apple's hefty $500 billion investment in U.S. manufacturing and silicon engineering over the next four years, a significant chunk will flow to TSMC's Phoenix facility. Apple stated in late February its multibillion-dollar commitment to advanced silicon production in TSMC's Arizona Fab 21. TSMC is expanding its U.S. footprint even further with an additional $100 billion investment in chipmaking infrastructure that adds up to the initial $65 billion buildout. This strategic move strengthens TSM's ties with domestic clients like Nvidia, AMD, and Qualcomm. It is not only the tech giants driving demand. Cloud hyperscalers Microsoft, Alphabet, and Amazon, along with OpenAI, are developing custom silicon solutions. This development represents another potent catalyst for TSMC's growth. With a current market cap of $916 billion, TSMC is just a 9% climb away from the trillion-dollar mark. The recent stock dip, attributed to tariff uncertainties and broader tech corrections, appears disconnected from TSMC's robust financials and outlook. Disclaimer: The content of this article is for informational purposes only and should not be construed as investment advice. We do not endorse any specific investment strategies or make recommendations regarding the purchase or sale of any securities.

Prediction: Buying This Artificial Intelligence (AI) Stock Will Set You Up for Life (And It's Not Palantir) | The Motley Fool

Palantir Technologies stock has been on a monster run since going public in 2020, with shares up close to 1,000%. I am here to tell you the stock is now overvalued. Shares of Palantir currently trade at a trailing price-to-sales (P/S) ratio of 79. No matter how fast the company grows its artificial intelligence (AI) services, the stock will take decades to catch up to this extreme valuation. If not Palantir, which AI stocks are set up for success over the next few years? One of my top choices is Taiwan Semiconductor Manufacturing (TSM -2.69%). Known simply as TSMC, the manufacturer of computer chips can help set investors up for life who buy today. Here's why. The leading AI chipmaker is Nvidia, with over $100 billion in annual revenue in 2024. However, Nvidia doesn't make its own computer chips. It leaves the dirty work to TSMC, which is a third-party provider of manufacturing and assembly for semiconductors, and the leading player in this space by a wide margin. Without TSMC, Nvidia would not be able to sell its advanced AI chips at its current scale. Rapid growth in spending on AI computer chips has led to an increase in demand for TSMC's factories, which are pumping out chips as fast as they reasonably can. Revenue grew to $90 billion on the back of this increase in demand, with revenue from TSMC's High-Performance Computing segment growing a blistering 58% year over year in 2024. Management expects this growth to continue in 2025. Over half of TSMC's revenue now comes from cloud and AI customers, with the company taking market share from semiconductor manufacturing competitors such as Intel. This is is a nice growth runway that could help accelerate consolidated revenue growth this year. The long-term looks even sweeter for TSMC. Demand for AI computer chips, cloud computing, and other semiconductor-intensive activities keeps growing, while the overall chip market is expected to reach $1 trillion in annual sales by 2030. Analysts and other industry players such as ASML believe that 40% of revenue will come from AI computer chips by 2030, or $400 billion in annual sales. Not all of these sales will flow to TSMC, but they should provide a fantastic long-term tailwind for the leader in the space. I expect TSMC's revenue to surpass $100 billion in 2025 and keep marching higher for the rest of the decade. Management at TSMC has a history of thinking for the long haul to help create a more robust business. Today, it is working to diversify its geographical footprint for its manufacturing facilities, which are now centered in Taiwan. Taiwan is under threat from China, which keeps stating it will reclaim the island and regularly practices amphibious invasions of the nation. TSMC can't control what China does, but it can prepare for any dour scenario if it actually occurs. The company has built a factory in the United States and plans to spend a total of $165 billion building manufacturing plants in the country. Despite this durable growth runway and further plans for geographic diversification, investors can still pick up shares of TSMC at a reasonable level with a price-to-earnings (P/E) ratio below the S&P 500 index. It trades at a trailing P/E of 24.6 vs. the S&P 500 index average P/E of 28.5. Over the last five years, TSMC's net income has grown by 179%. I think the company can at least grow earnings by 100% -- if not more -- through 2030, which would bring the P/E down to 12. That is a much too cheap level for a high-quality business with a dominant position in its field like TSMC. From my seat, this makes the stock an easy buy at today's levels. TSMC is the backbone of the AI market. Without it, the industry would have an extreme shortage of advanced computer chips. Let the stock be the backbone of your portfolio as well.

Here's My Top Artificial Intelligence (AI) Stock to Buy Right Now | The Motley Fool

Artificial intelligence (AI) investing has been center stage since 2023, but these stocks have taken a bit of a breather over the past month as the market cools off. However, I don't expect this to persist throughout 2025, and I wouldn't be surprised if these stocks start to move higher following strong first-quarter results. Of all the potential AI stock picks out there, there's one that I have ultimate confidence in: Taiwan Semiconductor Manufacturing (TSM -1.85%). It gives investors a little more than quarterly results; it reports revenue every month. Of the figures we have in 2025, business is still going strong, and investors should position themselves to take advantage of what I think will be a strong run to finish off 2025. Taiwan Semiconductor (also known as TSMC) is my best AI stock because of its position in the industry. Multiple competitors are vying to be the top provider of computing power for AI hyperscalers. However, none of these companies have the chip production capabilities. Instead, they farm that work out to a semiconductor foundry like Taiwan Semiconductor. This makes TSMC a neutral party in the AI race. It doesn't necessarily need to be the winner, because the winner will most likely purchase chips from TSMC (as will the losers). This positioning also gives management unparalleled vision into the company's future, as many of its clients place chip orders years in advance. Over the next five years, management sees AI-related chips delivering a compound annual growth rate of 45%. Companywide, they expect this growth rate to approach 20%. That's huge growth over the next five years, and I want to partly own that growth as a shareholder. Pundits might point out that because TSMC is not based in the U.S., it could be a target of President Donald Trump's tariffs. However, Taiwan seems to have sidestepped this threat by announcing $100 billion in further chip production capabilities in the U.S. Taiwan's President and TSMC's CEO have both denied that President Trump forced them into this expansion, as TSMC has already sold out U.S. chip production capabilities through 2027. Regardless, President Trump got what he wanted: TSMC moved some of its production within the U.S. This has allowed Taiwan to sidestep the tariff threat, for now. Even with all the concerns that the U.S. economy may be slowing, TSMC is still growing rapidly. Taiwan Semi's management provides investors with monthly revenue updates, and 2025 has been very strong so far. In January, revenue rose 36% year over year, and that growth accelerated to 43% in February. Clearly, it's full speed ahead for Taiwan Semi, yet the stock is priced at a dirt cheap level. Chip stocks have historically traded at a discount to their tech peers because of the cyclical nature of their business. However, we're undergoing the largest computing power boom that we've ever experienced, and it may be some time before we see a downturn in the chip market. Taiwan Semi's stock still reflects some of that original pessimism, as it trades for a lowly 20 times forward earnings. Considering that the S&P 500 trades for 21 times forward earnings, it's safe to say that TSMC is a pretty cheap stock. Despite its discount, it's putting up above-average growth. Taiwan Semi's neutral position in the AI race and its cheap stock price make it a no-brainer buy. It also knows how to play ball with the current presidential administration, alleviating some of the concerns that it is based overseas. Few stocks make me as confident as Taiwan Semiconductor, which is why it's my top AI stock to buy now.

Prediction: These 2 Artificial Intelligence (AI) Semiconductor Stocks Will Reclaim Their Spots in the Trillion-Dollar Club by Year's End | The Motley Fool

Two major chipmakers recently lost their places in the trillion-dollar club. Just seven public companies boast market capitalizations of at least $1 trillion, as I write this, and other than conglomerate Berkshire Hathaway, each of them is a technology company. The artificial intelligence (AI) trend has provided an intense tailwind for tech stocks in recent years, propelling the likes of Nvidia and Meta Platforms into the trillion-dollar club with Apple, Microsoft, Amazon, and Alphabet. However, some powerhouse companies that previously reached the 13-digit milestone have lost so much ground in recent months that they're back below that level again. That group includes a pair of AI chipmakers that I view as great buys right now, and on course to reachieve trillion-dollar valuations in 2025. Third-party foundry giant Taiwan Semiconductor Manufacturing (TSM 2.59%) specializes in advanced chipmaking processes that bring the hardware designs of Nvidia, Advanced Micro Devices, and many others to life. For the last couple of years, TSMC has been experiencing a new wave of revenue and profit acceleration thanks to the consistently strong levels of demand for high-end graphics processing units (GPUs) for use in data centers. While the steepening slopes of the lines in the charts below might make you think Taiwan Semi's growth rates are due to normalize, I don't see that happening anytime soon. For starters, Apple recently announced that it's planning to invest $500 billion into U.S. manufacturing and silicon engineering over the next four years. This is a big deal for TSMC, as Apple is using the largest share of the fabrication capacity at its Phoenix facility. Apple said in late February that its plans include "a multibillion-dollar commitment from Apple to produce advanced silicon in TSMC's Fab 21 facility in Arizona." In addition, TSMC is planning to further expand its footprint in the U.S. -- it recently announced plans to spend another $100 billion on chipmaking infrastructure here. That's on top of the $65 billion buildout it already has underway. These moves give Taiwan Semi greater opportunities to advance its relations with its existing domestic customers such as Nvidia, AMD, and Qualcomm. Wall Street appears to be quite bullish about Taiwan Semi's prospects over the next few years -- as you can see in the chart of analyst estimates below -- and another big reason why relates to the custom silicon solutions being developed by cloud hyperscalers Microsoft, Alphabet, and Amazon, as well as ChatGPT developer OpenAI. Between the rising levels of AI infrastructure investment by big tech and the debuts of powerful new AI chip architectures, there's reason to expect demand for TSMC's output will keep growing for the long term. TSMC's $916 billion market cap as I write this puts it roughly 9% away from a trillion-dollar valuation. I think the recent sell-off of its stock can be traced to ongoing uncertainty around tariffs and the macroeconomic outlook, as well as the broader tech sector correction. There isn't anything in TSMC's current financial picture or its outlook that would suggest that the company is in trouble or that a sell-off is warranted. With a forward price-to-earnings (P/E) multiple of 19.5, TSMC is trading in line with its three-year average. However, the company's valuation is more of a bargain when compared to the forward P/E trend over just the last year, which peaked around 29. I would pounce on the opportunity to buy this stock hand over fist before the company potentially reclaims its trillion-dollar valuation and soars even higher from there. Broadcom (AVGO -0.08%) offers a host of AI-powered products and services, but primarily specializes in network equipment for data centers, as well as security solutions. It too is emerging as a major beneficiary from the increasing demand for custom silicon solutions. As the market cap figures below make clear, dips in Broadcom stock tend to be short-lived and are followed by compelling rebounds. I see the current sell-off in Broadcom as something more rooted in macro concerns around the economy as opposed to anything specific related to Broadcom's business. For the last two years, the narratives on Wall Street around the AI hardware space focused heavily on GPUs, primarily those designed by Nvidia and AMD. While those GPUs are still very much part of the story, Microsoft, Amazon, Alphabet, and Meta could spend north of $320 billion on AI infrastructure this year across their own chipware, AI data centers, and more. Given Broadcom's expertise in network infrastructure and security protocols for data centers, I think that its moment in the AI spotlight has finally arrived. Broadcom CEO Hock Tan noted during the company's earnings call earlier this month that "two additional hyperscalers have selected Broadcom to develop custom accelerators to train their next-generation frontier models." Given strong AI demand and Broadcom's important role in the data center market, I wouldn't worry too much about the current volatility. I'm optimistic that the company's growth will continue accelerating thanks to rising AI infrastructure spend and Broadcom's existing inroads with big tech -- particularly the cloud hyperscalers. I anticipate investor confidence will begin to rise in the coming quarters should Broadcom continue executing in helping big tech build out AI infrastructure. For this reason, I think Broadcom will be back in the trillion-dollar club sooner than later.