AT&T (T -0.15%) and TSMC (TSM -2.24%) are both often considered stable blue chip tech stocks for conservative investors. AT&T is one of the largest telecom companies in America, while TSMC is the world's largest contract chipmaker.

Both stocks look cheap and pay attractive dividends. AT&T trades at just 7 times forward earnings and pays a forward yield of 5.8%. TSMC trades at 14 times forward earnings and pays a forward yield of 2.2%. But should investors simply buy AT&T because it looks cheaper and pays a bigger dividend? Let's take a fresh look at both tech giants to decide.

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AT&T starts a new chapter

Over the past two years, AT&T streamlined its business by divesting DIRECTV, merging Time Warner (WarnerMedia) with Discovery to create Warner Bros. Discovery, divesting its smaller media assets, and selling some of its real estate. Those bold decisions transformed AT&T back into a smaller telecom company that could focus on growing its wireless and wireline businesses instead of clumsily building a media empire.

At the beginning of the year, AT&T claimed it could grow its annual revenue at a low-single-digit compound annual growth rate (CAGR) from 2022 to 2024, while increasing its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and adjusted EPS at mid-single-digit CAGRs. Those growth rates might seem anemic, but they're far more stable than the uneven returns it previously generated while spinning its pay TV and media businesses on wobbly plates.

AT&T's wireless business is now growing at a healthy clip again with the addition of 2.2 million postpaid phone net adds in the first nine months of 2022. By comparison, Verizon lost 36,000 postpaid phone subscribers in the first quarter of 2022, then added just 20,000 subscribers in the second quarter and 8,000 subscribers in the third quarter.

The strength of AT&T's wireless business has largely offset the slower growth of its wireline business, which faces tough headwinds in the enterprise market, and it expects its adjusted EPS from continuing operations to come in at $2.50 "or higher" for the full year. That should easily cover its annual dividend payout of $1.11 per share.

TSMC faces cyclical headwinds

TSMC manufactures the world's smallest and most advanced chips for Apple, Qualcomm, and AMD, and other fabless chipmakers. No other foundry, including its closest competitors Samsung and Intel, can currently match TSMC's process in terms of chip size, transistor density, and power efficiency.

TSMC's technological lead and scale make it a bellwether of the global semiconductor market. As a result, its growth is highly cyclical and dependent on the global demand for new chips -- which skyrocketed throughout the pandemic but now faces slower growth as the PC market stalls out, smartphone sales cool off, and other industries face macroeconomic headwinds.

At the same time, TSMC needs to keep its capex elevated to maintain its lead in the process race against Samsung and Intel. It plans to spend $36 billion on capex this year, compared to Intel's planned capex of $21 billion, as it ramps up its production of top-tier 3nm and 2nm chips.

Based on that combination of slowing revenue growth and higher spending, analysts expect TSMC's revenue to rise just 7% next year as its EPS declines 5%. That would represent a significant slowdown from analysts' projections for 43% revenue growth and 69% earnings growth this year. TSMC doesn't consistently raise its dividends every year. However, its estimated EPS of 12.60 New Taiwan dollars for 2023 should easily cover its annual dividend payments of $11 NT per share.

Which stock is a smarter buy right now?

AT&T's business seems stable, but isn't completely immune to the macroeconomic headwinds. It actually reduced its full-year free-cash-flow (FCF) guidance earlier this year to account for delinquent consumer payments, and its enterprise-facing businesses are struggling with sluggish growth. However, it doesn't face an industrywide cyclical slowdown like TSMC.

AT&T also plans to ramp up its spending on new 5G and fiber networks this year, but it doesn't face as much pressure as TSMC to retain its lead in a cutting-edge field. It also doesn't face as many geopolitical risks as TSMC, which is based in Taiwan and remains heavily exposed to the escalating tensions between the U.S. and China.

I believe both of these tech stocks will remain steady investments as the bear market drags on. But if I could only pick one over the other right now, I'd stick with AT&T until the semiconductor market shows clearer signs of stabilizing. It almost certainly won't grow faster than TSMC over the long term, but AT&T's more predictable returns, lower valuation, and higher dividend could all make it a more appealing investment in this challenging market for cyclical tech stocks.