Taiwan Semiconductor Manufacturing (TSM), the company that produces computer chips for major tech firms like Apple, Nvidia, and Broadcom, is poised to outperform its rival Nvidia in the long run.
TSM’s dominance in semiconductor manufacturing stems from its relentless drive to improve its production processes. As a contract manufacturer, it doesn’t design and compete to sell chips itself, but instead focuses on delivering high-quality products to its customers. This approach allows TSM to maintain its position as the only company outside of Samsung that can produce cutting-edge AI-related computer chips.
With its vast customer base, including Nvidia, Apple, and Broadcom, TSM has significant bargaining power. The company is reportedly planning to raise prices by 30% at its Arizona facility to pass on tariff costs to customers. This would make it nearly impossible for these companies to leave or replicate the production process without incurring significant expenses.
In contrast, Nvidia’s value is heavily reliant on its innovative capabilities in AI-related chips. However, this approach comes with risks, as the company’s lead in semiconductor fabrication is difficult to replicate, and market trends can shift rapidly. TSMC, on the other hand, has a more diversified customer base and can benefit from growth in demand for semiconductors.
TSM’s steady long-term growth, combined with its customer diversification, positions it well to outperform Nvidia over the next 10 years. With a current market capitalization of $818 billion, TSMC is already undervalued compared to Nvidia, which has a valuation of $2.5 trillion. If Nvidia loses market share, TSM will likely benefit from increased demand for semiconductors. As TSM’s dominance in the semiconductor market grows, its stock price should reflect this, making it a more attractive investment opportunity.
Source: https://www.fool.com/investing/2025/04/27/1-stock-that-will-be-worth-more-than-nvidia