Nvidia vs. Taiwan Semiconductor: The AI Revolution Is Big Enough for Both. Here's the Better Buy.

The semiconductor industry has been supercharged in recent years by the rise and rapid adoption of artificial intelligence (AI), which isn’t surprising, as chips are essential for running AI applications in data centers, smartphones, computers, vehicles, robots, and factories.

Nvidia (NVDA -6.93%) and Taiwan Semiconductor Manufacturing (TSM -7.80%) are two of the most important players in the semiconductor space, which explains why they have been among the biggest beneficiaries of the AI-fueled semiconductor boom. Let’s see why these semiconductor stocks will continue capitalizing on the AI chip market’s growth, and which one is the better buy for the long run.

Nvidia and TSMC have been the cornerstone of the AI market’s growth

Nvidia’s dominant position in the graphics processing unit (GPU) space allowed it to quickly capitalize on the booming demand for AI chips, which were primarily used for training large language models (LLMs) during the initial phases of the AI rollout. Popular AI models, such as ChatGPT, Grok, Qwen, and others, have been trained using Nvidia’s chips.

NVDA – Nvidia

$186.25-$13.88 (-6.93%)

NASDAQ · As of 11:24 AM ET 11/05/26

The chip giant is now dominating the inference space as well, with a market share of more than 70%. This is great news for Nvidia investors, as AI compute is now shifting from training to inference. In fact, inference is expected to generate more revenue than training-oriented workloads in 2026, according to the Futurum Group.

At the same time, the emergence of new AI niches will expand Nvidia’s addressable market. Physical AI, for example, is expected to grow substantially over the long run. Physical AI refers to the integration of AI into objects that can be deployed in the real world, such as humanoid robots, autonomous vehicles, drones, and factory robots. Mordor Intelligence predicts that the physical AI market could clock annual growth of 37% through 2031.

This expansion of AI beyond data centers should ensure that Nvidia’s healthy growth continues. Not surprisingly, analysts expect Nvidia’s earnings to more than double in just two fiscal years, and the long-term earnings per share (EPS) growth estimate of 50% (per YCharts) suggests it can sustain its momentum for a long time.

Data by YCharts

Meanwhile, TSMC has been riding Nvidia’s coattails by virtue of being the latter’s foundry partner. Nvidia is a fabless chipmaker that utilizes TSMC’s semiconductor manufacturing and packaging services to bring its chip designs into the physical form. However, the good part about TSMC is that it manufactures chips for multiple customers, including Apple, Sony, MediaTek, Broadcom, Marvell, and others.

TSMC’s broad customer base allows it to serve multiple AI-focused end markets, including smartphones, personal computers, robots, and data centers. So, TSMC seems better-positioned to capitalize on the semiconductor industry’s long-term growth, which will be primarily fueled by AI. Industry association SEMI estimates that the global semiconductor industry’s revenue reached $1 trillion in the first eight months of 2026.

McKinsey expects the industry to generate $2.3 trillion in revenue in 2030. TSMC’s status as the world’s leading third-party chip manufacturer with a 73% market share, according to Counterpoint Research, makes it one of the best ways to play this lucrative space. Also, TSMC’s dominant share explains why it is the price maker, meaning its price hikes are likely to be accepted by customers, including Nvidia.

A recent report from Taiwan-based financial newspaper Commercial Times notes that TSMC could increase advanced chip packaging prices by up to 20%. So, I won’t be surprised to see TSMC’s margins heading higher in the future following an impressive jump this year.

Data by YCharts

The verdict

Both Nvidia and TSMC can deliver robust long-term growth. In fact, as the following chart tells us, there isn’t much difference in the potential long-term EPS growth both companies are anticipated to deliver.

Data by YCharts

That’s why we will look at their valuations to determine which AI stock you should consider buying right now.

Data by YCharts

So, TSMC and Nvidia are closely matched on the valuation front as well. Also, we have seen that both companies are projected to achieve nearly identical earnings growth over the long run. So, investors can consider buying either of these semiconductor stocks to capitalize on the AI infrastructure boom. Both companies dominate their respective niches in chip designing and manufacturing, which is why they are likely to grow at solid rates in the long run.

Moreover, TSMC and Nvidia are attractively valued despite their healthy growth rates. The tech-laden Nasdaq Composite index, for comparison, has a price-to-earnings ratio of 40. So, investors are getting a solid deal on these semiconductor stocks, and buying either of them could prove to be a profitable long-term move for the reasons discussed in this article.