The Motley Fool·2025-12-04 23:46Core Insights - The semiconductor industry is experiencing significant growth driven by the demand for artificial intelligence (AI) and advanced chips, with Nvidia and TSMC as key players [2][11]. Nvidia - Nvidia has seen a remarkable increase in demand for its GPUs, with a revenue growth of 62% year-over-year, totaling $57 billion in the most recent quarter [4]. - The company has established a strong hardware technology lead, supported by its CUDA software, which creates high switching costs for developers [5]. - Major customers, including Microsoft, Meta Platforms, Amazon, and Alphabet, account for 61% of Nvidia's sales, raising concerns about their potential shift towards custom AI accelerators [7][8]. - Nvidia's stock trades at 24 times analyst estimates for fiscal 2027, indicating that a significant portion of risk is already factored into the price [10]. TSMC - TSMC has captured over 70% of the contract chip manufacturing market, benefiting from the AI boom and achieving a 40.8% year-over-year revenue increase [11][12]. - The company's gross margin has expanded to 59.5%, with expectations of maintaining high margins despite a projected revenue growth slowdown to around 20% [12]. - TSMC's technological lead is secure, allowing it to invest more in research and development, ensuring it meets future demand [15]. - Geopolitical risks, particularly concerning Taiwan and China relations, pose a threat to TSMC, but the company is diversifying its facilities to mitigate these risks [16]. Investment Comparison - Both Nvidia and TSMC are trading at similar earnings multiples, but Nvidia may offer more upside potential due to its rapid growth [17]. - However, Nvidia faces higher uncertainty and competition, with signs of its major customers moving away from its products [18]. - TSMC is viewed as a less volatile investment with a more stable growth outlook, making it a preferred choice for investors seeking consistent earnings growth [19].