"is the backbone of the entire semiconductor sector, but it has only started trading like it in recent years. TSM stock is up by over 220% since the end of 2023 and still trails most big-name fabless AI stocks, even though this is the company that manufactures those chips and holds the cards. The latter is the most similarly-sized semiconductor company to TSMC. It has a market cap of $1.52 trillion, whereas TSM has a market cap of $1.42 trillion."
"Many investors are buying Broadcom despite Taiwan Semiconductor having twice the sales and profits. The rationale is that Broadcom has the higher growth potential as it has products rivaling Nvidia, and the software stack also gives it more sway. You'd be tempted to buy into both, but you should only pile into one this year. But let's first look into what each stock has on offer before we dig any deeper."
"Profits and sales have climbed in lockstep with the price. It would be unwise to think TSMC is ahead of itself, since it is now one of the cheaper stocks in the industry. The PE ratio of 31 times is cheaper than 64% of companies in the semiconductor industry. Forward PE is still within the higher end of the 10-year standard deviation, so the market isn't paying much, even after considering AI and the long-term tailwinds."
Taiwan Semiconductor rallied over 220% since the end of 2023 while still lagging many fabless AI names despite manufacturing those chips. Broadcom carries a $1.52 trillion market cap versus Taiwan Semiconductor's $1.42 trillion, and many investors favor Broadcom for perceived higher growth from products rivaling Nvidia and a strong software stack. TSMC's recent growth has been organic, with profits and sales rising alongside the share price and consistent beats of net income and revenue estimates since at least 2022. TSMC trades at a trailing PE of 31, cheaper than 64% of semiconductor peers. If markets maintain current multiples, TSMC could exceed $500 next year.
Read at 24/7 Wall St.
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