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 (AVGO)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.”
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Taiwan Semiconductor Manufacturing (TSM)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.
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