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NVDA vs. TSM: Which Semiconductor Stock Is the Better AI Investment?
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Key Takeaways
TSM's Q2 revenues rose 39%, with profits up 61%, fueled by demand for 3nm and 5nm AI chips.
NVDA sees strong AI chip demand but faces $8B in estimated losses from China chip restrictions in Q2 FY26.
TSM raised its FY25 revenue growth outlook to 30% and plans to invest up to $42B in advanced production.
NVIDIA Corporation (NVDA - Free Report) and Taiwan Semiconductor Manufacturing Company (TSM - Free Report) , also known as TSMC, are two of the most important companies in the global AI chip supply chain. NVIDIA designs the powerful graphics processing units (GPUs) that run advanced AI models, while Taiwan Semiconductor manufactures those chips using its leading-edge process technologies.
Both companies are critical to AI infrastructure, but which one offers the better investment opportunity right now? Let’s break it down by looking at their financial performance, challenges and growth outlook.
The Case for NVIDIA
NVIDIA is at the center of AI computing, with its products widely used across data centers, gaming and autonomous vehicles. The company continues to see strong demand from cloud providers, enterprises and startups building AI systems. In the first quarter of fiscal 2026, NVIDIA’s data center revenues rose 73% year over year to $39.1 billion, showing the strength of this part of its business.
Its newer Hopper 200 and Blackwell GPU platforms are being adopted quickly as customers work to grow their AI infrastructure. Much of this demand comes from large cloud providers that depend on NVIDIA GPUs for their AI workloads. The Blackwell architecture promises significantly higher performance, and upcoming versions like Blackwell Ultra and Vera Rubin are expected to strengthen NVIDIA’s position further as AI demand keeps growing.
However, the company faces near-term challenges from export restrictions. New U.S. rules stopped NVIDIA from selling its H20 chips to China, leading to lost sales of $2.5 billion in the first quarter. NVIDIA expects to lose another $8 billion in H20 sales during the second quarter.
These restrictions are already slowing NVIDIA’s growth. The company’s revenue forecast for the second quarter is $45 billion, implying a modest 2% sequential increase, well below the double-digit growth it has posted in the previous nine quarters. While NVIDIA’s long-term prospects are still strong, near-term uncertainty has clearly increased.
The Case for Taiwan Semiconductor
TSM manufactures chips for the world’s top tech companies, including NVIDIA, Advanced Micro Devices and Broadcom. Taiwan Semiconductor is known for its advanced production capabilities and has already moved into 3nm production, with 2nm coming soon. Its large scale allows it to handle rising AI chip demand better than most competitors.
In the second quarter of 2025, Taiwan Semiconductor Manufacturing reported a 39% increase in revenues and a 61% jump in profit. Its 3nm and 5nm chips accounted for nearly 60% of wafer sales. AI-related revenues tripled in 2024 and are expected to double again in 2025. With AI likely to be a long-term driver, TSMC’s future growth potential looks strong.
Buoyed by strong demand for its 3nm and 5nm chips, Taiwan Semiconductor raised its revenue growth guidance for full-year 2025 to 30% from mind-20% projected earlier. For the third quarter, TSMC expects revenues in the range of $31.8-$33 billion, calling for a sequential increase of 6%-10%.
Taiwan Semiconductor is also investing heavily to stay ahead. It plans to spend up to $42 billion in 2025, mostly on advanced manufacturing. This is up from $29.8 billion in 2024 and shows its commitment to keeping its lead in cutting-edge chip production.
NVDA vs. TSM: EPS Estimate Trends
The Zacks Consensus Estimate projects NVIDIA’s earnings per share (EPS) to rise 42.1% in fiscal 2026 and 32.1% in fiscal 2027. Over the past seven days, earnings estimates have been revised upward, showing strong confidence.
Image Source: Zacks Investment Research
The consensus mark for Taiwan Semiconductor’s earnings also demonstrates strong growth ahead. EPS is expected to grow 34.7% in 2025 and 15.2% in 2026. The EPS estimate trend for TSMC has been moving upward over the last 30 days.
Image Source: Zacks Investment Research
NVDA vs. TSM: Price Performance & Valuation Check
Shares of NVIDIA and Taiwan Semiconductor have performed well so far in 2025 despite severe market volatility due to macro uncertainty and geopolitical tension. NVIDIA shares have risen 28.9% year to date, while Taiwan Semiconductor has soared 24.1%.
Image Source: Zacks Investment Research
On the valuation front, Taiwan Semiconductor trades at a more reasonable level. Its price-to-earnings (P/E) multiple is 23.93X, far below NVIDIA’s 35.57X. This suggests that TSM offers better value relative to its growth potential.
Image Source: Zacks Investment Research
TSM: A Better Bet Than NVDA
While NVIDIA continues to lead in AI chip design and has a powerful product roadmap, it also faces short-term hurdles, especially from export restrictions that limit its access to the massive Chinese market. Its stock is also more expensive, leaving less room for upside if growth slows.
Meanwhile, Taiwan Semiconductor sits at the core of the AI chip supply chain with less geopolitical risk and a more reasonable valuation. Its growth outlook is strong, backed by rising AI demand and major investments in future technology.
For investors looking for a solid AI play with a better risk-reward balance, Taiwan Semiconductor is the smarter choice today.
Image: Bigstock
NVDA vs. TSM: Which Semiconductor Stock Is the Better AI Investment?
Key Takeaways
NVIDIA Corporation (NVDA - Free Report) and Taiwan Semiconductor Manufacturing Company (TSM - Free Report) , also known as TSMC, are two of the most important companies in the global AI chip supply chain. NVIDIA designs the powerful graphics processing units (GPUs) that run advanced AI models, while Taiwan Semiconductor manufactures those chips using its leading-edge process technologies.
Both companies are critical to AI infrastructure, but which one offers the better investment opportunity right now? Let’s break it down by looking at their financial performance, challenges and growth outlook.
The Case for NVIDIA
NVIDIA is at the center of AI computing, with its products widely used across data centers, gaming and autonomous vehicles. The company continues to see strong demand from cloud providers, enterprises and startups building AI systems. In the first quarter of fiscal 2026, NVIDIA’s data center revenues rose 73% year over year to $39.1 billion, showing the strength of this part of its business.
Its newer Hopper 200 and Blackwell GPU platforms are being adopted quickly as customers work to grow their AI infrastructure. Much of this demand comes from large cloud providers that depend on NVIDIA GPUs for their AI workloads. The Blackwell architecture promises significantly higher performance, and upcoming versions like Blackwell Ultra and Vera Rubin are expected to strengthen NVIDIA’s position further as AI demand keeps growing.
However, the company faces near-term challenges from export restrictions. New U.S. rules stopped NVIDIA from selling its H20 chips to China, leading to lost sales of $2.5 billion in the first quarter. NVIDIA expects to lose another $8 billion in H20 sales during the second quarter.
These restrictions are already slowing NVIDIA’s growth. The company’s revenue forecast for the second quarter is $45 billion, implying a modest 2% sequential increase, well below the double-digit growth it has posted in the previous nine quarters. While NVIDIA’s long-term prospects are still strong, near-term uncertainty has clearly increased.
The Case for Taiwan Semiconductor
TSM manufactures chips for the world’s top tech companies, including NVIDIA, Advanced Micro Devices and Broadcom. Taiwan Semiconductor is known for its advanced production capabilities and has already moved into 3nm production, with 2nm coming soon. Its large scale allows it to handle rising AI chip demand better than most competitors.
In the second quarter of 2025, Taiwan Semiconductor Manufacturing reported a 39% increase in revenues and a 61% jump in profit. Its 3nm and 5nm chips accounted for nearly 60% of wafer sales. AI-related revenues tripled in 2024 and are expected to double again in 2025. With AI likely to be a long-term driver, TSMC’s future growth potential looks strong.
Buoyed by strong demand for its 3nm and 5nm chips, Taiwan Semiconductor raised its revenue growth guidance for full-year 2025 to 30% from mind-20% projected earlier. For the third quarter, TSMC expects revenues in the range of $31.8-$33 billion, calling for a sequential increase of 6%-10%.
Taiwan Semiconductor is also investing heavily to stay ahead. It plans to spend up to $42 billion in 2025, mostly on advanced manufacturing. This is up from $29.8 billion in 2024 and shows its commitment to keeping its lead in cutting-edge chip production.
NVDA vs. TSM: EPS Estimate Trends
The Zacks Consensus Estimate projects NVIDIA’s earnings per share (EPS) to rise 42.1% in fiscal 2026 and 32.1% in fiscal 2027. Over the past seven days, earnings estimates have been revised upward, showing strong confidence.
Image Source: Zacks Investment Research
The consensus mark for Taiwan Semiconductor’s earnings also demonstrates strong growth ahead. EPS is expected to grow 34.7% in 2025 and 15.2% in 2026. The EPS estimate trend for TSMC has been moving upward over the last 30 days.
Image Source: Zacks Investment Research
NVDA vs. TSM: Price Performance & Valuation Check
Shares of NVIDIA and Taiwan Semiconductor have performed well so far in 2025 despite severe market volatility due to macro uncertainty and geopolitical tension. NVIDIA shares have risen 28.9% year to date, while Taiwan Semiconductor has soared 24.1%.
Image Source: Zacks Investment Research
On the valuation front, Taiwan Semiconductor trades at a more reasonable level. Its price-to-earnings (P/E) multiple is 23.93X, far below NVIDIA’s 35.57X. This suggests that TSM offers better value relative to its growth potential.
Image Source: Zacks Investment Research
TSM: A Better Bet Than NVDA
While NVIDIA continues to lead in AI chip design and has a powerful product roadmap, it also faces short-term hurdles, especially from export restrictions that limit its access to the massive Chinese market. Its stock is also more expensive, leaving less room for upside if growth slows.
Meanwhile, Taiwan Semiconductor sits at the core of the AI chip supply chain with less geopolitical risk and a more reasonable valuation. Its growth outlook is strong, backed by rising AI demand and major investments in future technology.
For investors looking for a solid AI play with a better risk-reward balance, Taiwan Semiconductor is the smarter choice today.
TSM carries a Zacks Rank #2 (Buy), making it a clear winner over NVDA, which has a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.