Wednesday is shaping up to be a good day for semiconductor investors, as good news from China (and a potential money grab in Taiwan) lifts share prices of Applied Materials (AMAT +4.26%), ASML Holding (ASML +6.97%), and Taiwan Semiconductor Manufacturing Company (TSM +6.30%).
As of 10:30 a.m. ET, Applied Materials stock is up 4.9% and ASML 7.4%. TSMC bounced back from yesterday's decline with a 6.9% gain today.
NYSE: TSM
Key Data Points
Good news for semiconductor equipment stocks
Starting at the top of the supply chain, Applied Materials won an upgrade from Barclays this morning. As analyst Tom O'Malley explained, he's seeing a "robust uptick" in orders for foreign semiconductor manufacturing equipment in China, as that nation spends heavily to make itself self-sufficient in chips manufacturing. At the same time, O'Malley predicts semiconductor companies will spend "aggressively" on capital investment in the U.S. as they rake in subsidies from the U.S. CHIPS Act.
What's good for Applied Materials should be just as good for its competitor ASML -- so both stocks are rising side by side this morning.
Barclays also boosted TSMC stock today, raising its price target on the overweight-rated stock to $170. The analyst highlighted demand for 2 nanometer chips as a "very, very big" profits driver for TSMC (as well as an impetus to spend on chips manufacturing equipment). This news follows a report yesterday that TSMC may raise prices on its chip manufacturing contracts -- to try to grab a bigger share of the beaucoup profits that Nvidia (NVDA +5.93%) has been raking in on artificial intelligence chips.
Which semiconductor stock should you buy?
And so we have three solid chip stocks to consider today. Which one would I buy?
None of the three looks cheap, with TSMC stock costing nearly 30 times earnings, Applied Materials 24 times, and ASML stock twice as much as that -- 48 times trailing earnings. Of the three, though, TSMC has the fastest growth rate at a bit more than 20%, giving it a PEG ratio of 1.5, versus PEGs of 2.4 for both Applied Materials and ASML.
This makes TSMC the closest to a "buy."
