In this piece, I evaluated two semiconductor stocks, Taiwan Semiconductor Manufacturing (NYSE:TSM) and Broadcom (NASDAQ:AVGO), using TipRanks’ Comparison Tool to see which is the better buy. A closer look suggests a bullish view of TSM and a neutral view of Broadcom.
Taiwan Semiconductor Manufacturing manufactures and sells semiconductors for several end markets, including gaming consoles, servers, tablets, and computers, the automotive market, the Internet of Things, and other digital consumer electronics. On the other hand, Broadcom’s chips target the renewable energy, automotive, military and aerospace, industrial, and robotics markets.
Shares of TSM have soared 71% year-to-date and are up 76% over the last year. Meanwhile, Broadcom stock has jumped 49% year-to-date and is up over 100% in the last year.
The differing 12-month returns of TSM and Broadcom are suggestive of the concerns some Americans may have with holding Taiwanese stocks.
China has long seen Taiwan as part of its territory — even though Taiwan rules itself. As a result, China has been increasing its threats against and military exercises around the small island. Of course, uncertainties like that are enough to make many investors nervous, but there’s more to the story when comparing TSM and Broadcom.
We’ll compare their price-to-earnings (P/E) ratios to gauge their valuations against each other and that of their industry. For comparison, the semiconductor industry is trading at a P/E of 68.8x versus its three-year average of 34.6x.
Taiwan Semiconductor Manufacturing (NYSE:TSM)
At a P/E of 34.4x, Taiwan Semiconductor Manufacturing is trading at a steep discount to Broadcom and many other U.S. semiconductor names. Plus, without TSM, some of the world’s best-known semiconductor names wouldn’t have any products. Thus, a bullish view seems appropriate.
The biggest difference between TSM and Broadcom is that TSM operates as a foundry, meaning it manufactures chips for other companies like Intel (NASDAQ:INTC). In fact, TSM is the world’s largest contract chipmaker, and it’s the one that…
..
