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Which Chip Stock to Buy in a Murky September? NVDA or TSM
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The advent of artificial intelligence (AI) helped Wall Street’s darling semiconductor stock, NVIDIA Corporation (NVDA - Free Report) , witness a meteoric rise in the last few years. NVIDIA designs specialized chips and outsources the manufacturing to foundries like Taiwan Semiconductor Manufacturing Company Limited (TSM - Free Report) , better known as TSMC. So, in a way, these stocks complement each other; they aren’t competitors.
The TSMC stock has also seen healthy gains so far this year. However, recently, a couple of factors weighed on NVIDIA’s shares. Does this mean the TSMC stock is now more alluring compared to the NVIDIA stock? Let’s have a look –
The Bullish Case for the NVIDIA Stock
Demand for AI models is here to stay for the long run as they are presently deployed across several verticals, including cloud computing. NVIDIA’s chips are needed for AI models, which explains why the semiconductor giants’ H100 graphic cards are the most desirable in the AI chip market.
Moreover, the largely anticipated next-generation Blackwell AI chips would provide NVIDIA a competitive edge over its peers since this chip’s infrastructure platform can offer more AI throughput than the present Hopper platform. Simultaneously, NVIDIA’s initiatives to penetrate the gaming market with GeForce and the industrial metaverse space in a tie-up with Siemens is a tailwind for the company.
The company’s CEO, Jensen Huang also acknowledged that $1 trillion worth of data centers would migrate from central processing units to graphic processing units (GPUs). NVIDIA is the global leader in GPUs and its revenues from the data center business soared 154% year over year in the second quarter of 2025.
Despite the positives, the NVIDIA stock is facing bouts of volatility in September. The NVIDIA stock lately notched its worst two-day trading stretch in about two years after the Department of Justice subpoenaed the chipmaker regarding an antitrust investigation.
Anyhow, September is historically the worst month for the NVIDIA stock. NVIDIA’s shares, on average, declined 2.4% in September compared to the S&P 500 and Nasdaq’s decline of 1.2% and 0.9%, respectively, per the Dow Jones Market Data.
NVIDIA’s latest promising quarterly results also failed to jack up its share price as it couldn’t keep up with high expectations. After all, the NVIDIA stock has been the best performer on the S&P 500 so far this year (read more: The Best Chip Stock Post NVIDIA Earnings: NVDA, AMD or INTC?).
2 Reasons to be Bullish on the TSMC Stock
Unlike NVIDIA, the TSMC stock has fared much better in September and there are a couple of reasons to be positive on it. As more companies have started to implement AI features in smartphones, the demand for TSMC’s chips is expected to increase. Apple Inc (AAPL - Free Report) is one of the primary clients of TSMC and the launch of iPhone 16 would surely boost demand for TSMC’s chips.
The ever-growing demand for AI applications would help TSMC’s sales improve in the upcoming years. Notably, demand for AI applications such as Open AI’s ChatGPT and Alphabet Inc.’s (GOOGL - Free Report) Gemini have increased substantially in recent times.
As a result, TSMC’s earnings outlook for the present year looks encouraging, with the $6.45 Zacks Consensus Estimate for earnings per share up 11.4% year over year.
Image Source: Zacks Investment Research
TSMC Stock – A Less Risky Bet
In early August, NVIDIA’s shares took a beating after major tech players curtailed spending on AI. NVIDIA is heavily dependent on the AI industry and lacks diversification.
On the contrary, TSMC’s customer base is not limited to the AI industry only. It is spread across the automotive and consumer electronic industries. This diversification insulates the TSMC stock from any industry-specific downturns and provides a steady stream of income.
TSMC Stock – More Pricing Power, Strategic Partnerships
The TSMC stock accounts for an astounding 90% of high-end chips in the global semiconductor market. This dominance gives the TSMC stock significant pricing power. When NVIDIA fails to meet the soaring demand for AI chips, TSMC can leverage its capacity to charge higher prices and increase profitability.
TSMC, by the way, is the exclusive manufacturer of Apple’s AI chips, and this relationship should certainly lead to higher volume orders, boosting TSMC’s revenues. However, NVIDIA’s total dependency on data center AI chips means that any disruption in the AI industry would impact its business.
TSMC Less Pricey Than NVIDIA
The TSMC stock is less expensive than NVIDIA, which has given the integrated circuit foundry an upper hand over the semiconductor behemoth. This is because buying TSMC’s shares won’t burn a larger hole in your wallet than the NVDA stock.
After all, per the price/earnings ratio, the TSMC stock currently trades at 24.8X forward earnings. However, NVDA’s forward earnings multiple is 39.1X.
Image Source: Zacks Investment Research
The TSMC Stock to Buy Hand Over Fist
The TSMC stock is a better buy than the NVIDIA stock due to reasonable valuations, pricing power, tactical partnerships, diversification, and an inherent ability to exploit the growing demand for AI applications.
Well-known brokers have increased the average short-term price target of the TSMC stock by 27.6% from the company’s last closing price of $160.49. The analysts have set the highest price target at $250, an upside of 55.8%.
Image: Bigstock
Which Chip Stock to Buy in a Murky September? NVDA or TSM
The advent of artificial intelligence (AI) helped Wall Street’s darling semiconductor stock, NVIDIA Corporation (NVDA - Free Report) , witness a meteoric rise in the last few years. NVIDIA designs specialized chips and outsources the manufacturing to foundries like Taiwan Semiconductor Manufacturing Company Limited (TSM - Free Report) , better known as TSMC. So, in a way, these stocks complement each other; they aren’t competitors.
The TSMC stock has also seen healthy gains so far this year. However, recently, a couple of factors weighed on NVIDIA’s shares. Does this mean the TSMC stock is now more alluring compared to the NVIDIA stock? Let’s have a look –
The Bullish Case for the NVIDIA Stock
Demand for AI models is here to stay for the long run as they are presently deployed across several verticals, including cloud computing. NVIDIA’s chips are needed for AI models, which explains why the semiconductor giants’ H100 graphic cards are the most desirable in the AI chip market.
Moreover, the largely anticipated next-generation Blackwell AI chips would provide NVIDIA a competitive edge over its peers since this chip’s infrastructure platform can offer more AI throughput than the present Hopper platform. Simultaneously, NVIDIA’s initiatives to penetrate the gaming market with GeForce and the industrial metaverse space in a tie-up with Siemens is a tailwind for the company.
The company’s CEO, Jensen Huang also acknowledged that $1 trillion worth of data centers would migrate from central processing units to graphic processing units (GPUs). NVIDIA is the global leader in GPUs and its revenues from the data center business soared 154% year over year in the second quarter of 2025.
NVIDIA also approved a $50 billion share repurchase plan, a tell-tale sign of a healthy corporate organization (read more: NVIDIA Approves $50 Billion Stock Buyback: Time to Buy?).
NVIDIA Stock – Facing Short-Term Volatility
Despite the positives, the NVIDIA stock is facing bouts of volatility in September. The NVIDIA stock lately notched its worst two-day trading stretch in about two years after the Department of Justice subpoenaed the chipmaker regarding an antitrust investigation.
Anyhow, September is historically the worst month for the NVIDIA stock. NVIDIA’s shares, on average, declined 2.4% in September compared to the S&P 500 and Nasdaq’s decline of 1.2% and 0.9%, respectively, per the Dow Jones Market Data.
NVIDIA’s latest promising quarterly results also failed to jack up its share price as it couldn’t keep up with high expectations. After all, the NVIDIA stock has been the best performer on the S&P 500 so far this year (read more: The Best Chip Stock Post NVIDIA Earnings: NVDA, AMD or INTC?).
2 Reasons to be Bullish on the TSMC Stock
Unlike NVIDIA, the TSMC stock has fared much better in September and there are a couple of reasons to be positive on it. As more companies have started to implement AI features in smartphones, the demand for TSMC’s chips is expected to increase. Apple Inc (AAPL - Free Report) is one of the primary clients of TSMC and the launch of iPhone 16 would surely boost demand for TSMC’s chips.
The ever-growing demand for AI applications would help TSMC’s sales improve in the upcoming years. Notably, demand for AI applications such as Open AI’s ChatGPT and Alphabet Inc.’s (GOOGL - Free Report) Gemini have increased substantially in recent times.
As a result, TSMC’s earnings outlook for the present year looks encouraging, with the $6.45 Zacks Consensus Estimate for earnings per share up 11.4% year over year.
Image Source: Zacks Investment Research
TSMC Stock – A Less Risky Bet
In early August, NVIDIA’s shares took a beating after major tech players curtailed spending on AI. NVIDIA is heavily dependent on the AI industry and lacks diversification.
On the contrary, TSMC’s customer base is not limited to the AI industry only. It is spread across the automotive and consumer electronic industries. This diversification insulates the TSMC stock from any industry-specific downturns and provides a steady stream of income.
TSMC Stock – More Pricing Power, Strategic Partnerships
The TSMC stock accounts for an astounding 90% of high-end chips in the global semiconductor market. This dominance gives the TSMC stock significant pricing power. When NVIDIA fails to meet the soaring demand for AI chips, TSMC can leverage its capacity to charge higher prices and increase profitability.
TSMC, by the way, is the exclusive manufacturer of Apple’s AI chips, and this relationship should certainly lead to higher volume orders, boosting TSMC’s revenues. However, NVIDIA’s total dependency on data center AI chips means that any disruption in the AI industry would impact its business.
TSMC Less Pricey Than NVIDIA
The TSMC stock is less expensive than NVIDIA, which has given the integrated circuit foundry an upper hand over the semiconductor behemoth. This is because buying TSMC’s shares won’t burn a larger hole in your wallet than the NVDA stock.
After all, per the price/earnings ratio, the TSMC stock currently trades at 24.8X forward earnings. However, NVDA’s forward earnings multiple is 39.1X.
Image Source: Zacks Investment Research
The TSMC Stock to Buy Hand Over Fist
The TSMC stock is a better buy than the NVIDIA stock due to reasonable valuations, pricing power, tactical partnerships, diversification, and an inherent ability to exploit the growing demand for AI applications.
Well-known brokers have increased the average short-term price target of the TSMC stock by 27.6% from the company’s last closing price of $160.49. The analysts have set the highest price target at $250, an upside of 55.8%.
Image Source: Zacks Investment Research
The TSMC stock, thus, has a Zacks Rank #1 (Strong Buy). But NVDA has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.