In the realm of investing, the presence of artificial intelligence (AI) acted as a bedrock, propelling the star semiconductor stock, NVIDIA Corporation, to transcendent heights in recent times. NVIDIA’s modus operandi involves the design of specialized chips, with their manufacturing entrusted to foundries such as the revered Taiwan Semiconductor Manufacturing Company Limited, fondly known as TSMC. In an intriguing symbiosis, these stocks complement rather than compete against each other.
While the TSMC stock saw commendable growth this year, certain recent factors cast shadows on NVIDIA’s shares. Does this, in turn, herald a potential shift in favor of the alluring TSMC stock over NVIDIA’s offering? Let’s delve deeper to gain clarity.
The Bright Prospects of NVIDIA Stock
The steadfast demand for AI models appears poised for an enduring stay, finding applications across diverse verticals, including the expansive realm of cloud computing. NVIDIA’s chips are indispensable for nurturing AI models, epitomized by the coveted H100 graphic cards that reign supreme in the AI chip market.
Furthermore, the imminent arrival of the much-anticipated next-generation Blackwell AI chips could potentially furnish NVIDIA with a competitive edge, given its capacity to deliver superior AI throughput compared to the current Hopper platform. Simultaneously, NVIDIA’s forays into the gaming sector with GeForce, alongside its strategic venture in the industrial metaverse realm in collaboration with Siemens, serve as propellers for the company’s growth trajectory.
Acknowledging the impending transition of $1 trillion worth of data centers from central processing units to graphic processing units (GPUs), NVIDIA emerges as the unrivaled global leader in GPUs. Witnessing a staggering 154% year-over-year surge in revenues from the data center segment in the second quarter of 2025, NVIDIA exudes prowess in this domain.
Emphasizing its robust organizational health, NVIDIA greenlit a $50 billion share repurchase scheme, symbolizing a robust corporate structure.
Amid the prevailing positives, NVIDIA’s stock contends with bouts of volatility in September. Recently, NVIDIA weathered its most challenging two-day trading phase in over two years subsequent to an antitrust investigation subpoena from the Department of Justice.
Historically, September stands as a somber month for NVIDIA, with its shares typically witnessing a 2.4% decline, juxtaposed with the S&P 500 and Nasdaq’s milder retreats of 1.2% and 0.9%, respectively, as per the Dow Jones Market Data.
Despite posting promising quarterly results, NVIDIA’s share price failed to ascend to anticipate heights, given the weight of lofty expectations. Having been the premier performer on the S&P 500 this year, NVIDIA’s stellar run faced a hiccup.
The Attractive Outlook for TSMC Stock
Diverging from NVIDIA’s trajectory, the TSMC stock witnessed a more stable September, underpinned by several positive factors. The expanding integration of AI features in smartphones by various companies portends a surge in demand for TSMC’s chips. Among TSMC’s prominent clientele, Apple Inc shines bright, with the impending iPhone 16 launch expected to further bolster demand for TSMC’s chips.
The surging demand for AI applications forecasts enhanced sales for TSMC in forthcoming years, amplified by the escalating adoption of AI applications like Open AI’s ChatGPT and Alphabet Inc.’s GOOGL Gemini, signaling an upward growth trajectory.
Buoyed by these factors, TSMC’s earnings outlook for the ongoing year appears promising, with the Zacks Consensus Estimate projecting a year-over-year 11.4% surge to $6.45 per share.
Evaluating the TSMC Advantage Over NVIDIA
In an early August turmoil, NVIDIA’s shares suffered a setback as major tech players scaled back investments in AI. Being heavily reliant on the AI sector, NVIDIA faces vulnerabilities arising from its lack of diversification.
Conversely, TSMC’s clientele extends beyond the confines of the AI industry, encompassing automotive and consumer electronics sectors, endowing it with resilience against industry-specific downturns and ensuring a steady revenue inflow.
Commanding a staggering 90% market share in high-end chips across the global semiconductor landscape, TSMC wields considerable pricing power. This dominion allows TSMC to capitalize on NVIDIA’s inability to meet the burgeoning demand for AI chips by imposing higher prices, thereby boosting profitability.
Besides, being the exclusive manufacturer of Apple’s AI chips bolsters TSMC’s position in the market, facilitating an uptick in volume orders and revenue. Conversely, NVIDIA’s singular focus on data center AI chips leaves it vulnerable to disruptions within the AI industry.
The Cost Consideration: TSMC vs NVIDIA
TSMC emerges as a more cost-effective option compared to NVIDIA, tipping the scales in favor of the integrated circuit foundry over the semiconductor giant. TSMC’s shares trade at a forward earnings multiple of 24.8X, presenting a more affordable investment avenue, unlike NVIDIA with a loftier 39.1X forward earnings multiple.