We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
AMAT vs. TSM: Which Semiconductor Stock is the Better Buy?
Read MoreHide Full Article
Key Takeaways
Applied Materials sees strong demand for its AI-focused etch and inspection tools, driving revenue growth.
TSM posted Q2 2025 revenues up 44.4% and profit up 60.7%, led by high-performance computing chips.
TSM plans $42B in 2025 capex, but faces geopolitical risks, high costs, and soft PC and smartphone markets.
Applied Materials (AMAT - Free Report) and Taiwan Semiconductor Manufacturing Company (TSM - Free Report) are two crucial players in the semiconductor supply chain, each contributing uniquely to the global chip manufacturing space.
While Applied Materials offers a comprehensive range of equipment and services spanning deposition, etching, and inspection across a wide range of semiconductor nodes, TSM is the global powerhouse of contract chip manufacturing.
Both AMAT and TSM are essential to the production of high-performance computing and artificial intelligence (AI) chips. However, from an investment point of view, one stock offers a more favorable outlook than the other right now. Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.
The Case for AMAT Stock
Applied Materials is a global leader in the supply chain of semiconductor fabrication equipment, covering deposition, etching and inspection — key processes in chip manufacturing. The company’s long-term growth prospects remain highly compelling due to its leadership in AI-driven semiconductor technology.
Due to the proliferation of AI and its rapid adoption by enterprises, Applied Materials is experiencing strong traction in its Sym3 Magnum etch system, Cold Field Emission eBeam technology, gate-all-around, backside power delivery, and 3D DRAM technology nodes crucial for developing high-performance processing and memory chips used for AI and HPC workloads.
Applied Material’s Sym3 Magnum etch system has generated more than $1.2 billion in revenues since its launch in February 2024. Additionally, in the second quarter of fiscal 2025, the management projected AMAT's revenues from DRAM customers to grow more than 40% in fiscal 2025.
Earlier, AMAT reported that its revenues from advanced semiconductor nodes crossed $2.5 billion in 2024, and it expected the figure to double in fiscal 2025 as customers’ adoption of its GAA and backside power delivery solutions grows. These factors are strongly reflected in AMAT’s top and bottom-line growth. The Zacks Consensus Estimate for revenues and EPS indicates year-over-year growth of 6% and 9.5%, respectively.
Image Source: Zacks Investment Research
The Case for TSM Stock
Taiwan Semiconductor Manufacturing Company produces semiconductor chips for global tech companies like NVIDIA, Advanced Micro Devices and Broadcom. TSM is known for its expertise in advanced chip production 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, TSM reported a 44.4% increase in revenues and a 60.7% jump in the bottom line. TSM’s high-performance computing segment contributed 60% of its total revenues. In the second quarter of 2025, the largest contribution to wafer revenues came from 5nm technology, accounting for 36% of the total sales, which was followed by 3nm at 24% and 7nm at 14%. TSM’s 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.
TSM 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. Nevertheless, challenges do linger for this chip manufacturing giant. TSM’s heavy presence in Taiwan leaves it exposed to geopolitical tensions between China and the United States.
While TSM is building new fabs in the United States, Japan and Europe, these projects are costly and time-consuming. Rising energy prices in Taiwan and weakness in the smartphone and PC markets could also weigh on profits in the short term. These factors are strongly reflected in TSM’s bottom line. The Zacks Consensus Estimate for 2025 and 2026 EPS indicates year-over-year growth of 37.5% and 13%, respectively, suggesting a long-term decline in the bottom line.
Image Source: Zacks Investment Research
Stock Price Performance and Valuation of AMAT and TSM
Year to date, shares of Applied Materials and Taiwan Semiconductor have gained 12.4% and 21%, respectively.
Image Source: Zacks Investment Research
Both AMAT and TSM are trading at forward 12-month price-to-sales multiples of 4.88X and 9.54X, above their one-year median of 4.85X and 9.03X, respectively, over the past year.
Image Source: Zacks Investment Research
Conclusion: AMAT vs. TSM
Applied Materials and Taiwan Semiconductor are both critical to the future of semiconductors, but AMAT stands out as the more attractive stock at this moment. Its leadership in key processes like deposition, etching and inspection will aid its growth in AI-driven semiconductor technology.
While TSMC’s growth prospects are impressive, especially in AI chips, the company faces more external risks — from geopolitical tensions to rising costs and supply-chain issues. Its recent downward earnings revisions and heavier capital investments add further uncertainty.
Image: Bigstock
AMAT vs. TSM: Which Semiconductor Stock is the Better Buy?
Key Takeaways
Applied Materials (AMAT - Free Report) and Taiwan Semiconductor Manufacturing Company (TSM - Free Report) are two crucial players in the semiconductor supply chain, each contributing uniquely to the global chip manufacturing space.
While Applied Materials offers a comprehensive range of equipment and services spanning deposition, etching, and inspection across a wide range of semiconductor nodes, TSM is the global powerhouse of contract chip manufacturing.
Both AMAT and TSM are essential to the production of high-performance computing and artificial intelligence (AI) chips. However, from an investment point of view, one stock offers a more favorable outlook than the other right now. Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.
The Case for AMAT Stock
Applied Materials is a global leader in the supply chain of semiconductor fabrication equipment, covering deposition, etching and inspection — key processes in chip manufacturing. The company’s long-term growth prospects remain highly compelling due to its leadership in AI-driven semiconductor technology.
Due to the proliferation of AI and its rapid adoption by enterprises, Applied Materials is experiencing strong traction in its Sym3 Magnum etch system, Cold Field Emission eBeam technology, gate-all-around, backside power delivery, and 3D DRAM technology nodes crucial for developing high-performance processing and memory chips used for AI and HPC workloads.
Applied Material’s Sym3 Magnum etch system has generated more than $1.2 billion in revenues since its launch in February 2024. Additionally, in the second quarter of fiscal 2025, the management projected AMAT's revenues from DRAM customers to grow more than 40% in fiscal 2025.
Earlier, AMAT reported that its revenues from advanced semiconductor nodes crossed $2.5 billion in 2024, and it expected the figure to double in fiscal 2025 as customers’ adoption of its GAA and backside power delivery solutions grows. These factors are strongly reflected in AMAT’s top and bottom-line growth. The Zacks Consensus Estimate for revenues and EPS indicates year-over-year growth of 6% and 9.5%, respectively.
Image Source: Zacks Investment Research
The Case for TSM Stock
Taiwan Semiconductor Manufacturing Company produces semiconductor chips for global tech companies like NVIDIA, Advanced Micro Devices and Broadcom. TSM is known for its expertise in advanced chip production 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, TSM reported a 44.4% increase in revenues and a 60.7% jump in the bottom line. TSM’s high-performance computing segment contributed 60% of its total revenues. In the second quarter of 2025, the largest contribution to wafer revenues came from 5nm technology, accounting for 36% of the total sales, which was followed by 3nm at 24% and 7nm at 14%. TSM’s 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.
TSM 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. Nevertheless, challenges do linger for this chip manufacturing giant. TSM’s heavy presence in Taiwan leaves it exposed to geopolitical tensions between China and the United States.
While TSM is building new fabs in the United States, Japan and Europe, these projects are costly and time-consuming. Rising energy prices in Taiwan and weakness in the smartphone and PC markets could also weigh on profits in the short term. These factors are strongly reflected in TSM’s bottom line. The Zacks Consensus Estimate for 2025 and 2026 EPS indicates year-over-year growth of 37.5% and 13%, respectively, suggesting a long-term decline in the bottom line.
Image Source: Zacks Investment Research
Stock Price Performance and Valuation of AMAT and TSM
Year to date, shares of Applied Materials and Taiwan Semiconductor have gained 12.4% and 21%, respectively.
Image Source: Zacks Investment Research
Both AMAT and TSM are trading at forward 12-month price-to-sales multiples of 4.88X and 9.54X, above their one-year median of 4.85X and 9.03X, respectively, over the past year.
Image Source: Zacks Investment Research
Conclusion: AMAT vs. TSM
Applied Materials and Taiwan Semiconductor are both critical to the future of semiconductors, but AMAT stands out as the more attractive stock at this moment. Its leadership in key processes like deposition, etching and inspection will aid its growth in AI-driven semiconductor technology.
While TSMC’s growth prospects are impressive, especially in AI chips, the company faces more external risks — from geopolitical tensions to rising costs and supply-chain issues. Its recent downward earnings revisions and heavier capital investments add further uncertainty.
These factors make AMAT a better choice at present. Additionally, AMAT carries a Zacks Rank #2 (Buy) and TSM has a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.