Just seven public companies boast market capitalizations of at least $1 trillion, as I write this, and other than conglomerate Berkshire Hathaway, each of them is a technology company.
The artificial intelligence (AI) trend has provided an intense tailwind for tech stocks in recent years, propelling the likes of Nvidia and Meta Platforms into the trillion-dollar club with Apple, Microsoft, Amazon, and Alphabet.
However, some powerhouse companies that previously reached the 13-digit milestone have lost so much ground in recent months that they're back below that level again. That group includes a pair of AI chipmakers that I view as great buys right now, and on course to reachieve trillion-dollar valuations in 2025.
1. Taiwan Semiconductor Manufacturing
Third-party foundry giant Taiwan Semiconductor Manufacturing (TSM 0.74%) specializes in advanced chipmaking processes that bring the hardware designs of Nvidia, Advanced Micro Devices, and many others to life. For the last couple of years, TSMC has been experiencing a new wave of revenue and profit acceleration thanks to the consistently strong levels of demand for high-end graphics processing units (GPUs) for use in data centers.
While the steepening slopes of the lines in the charts below might make you think Taiwan Semi's growth rates are due to normalize, I don't see that happening anytime soon.
TSM Revenue (Quarterly) data by YCharts
For starters, Apple recently announced that it's planning to invest $500 billion into U.S. manufacturing and silicon engineering over the next four years. This is a big deal for TSMC, as Apple is using the largest share of the fabrication capacity at its Phoenix facility. Apple said in late February that its plans include "a multibillion-dollar commitment from Apple to produce advanced silicon in TSMC's Fab 21 facility in Arizona."
In addition, TSMC is planning to further expand its footprint in the U.S. -- it recently announced plans to spend another $100 billion on chipmaking infrastructure here. That's on top of the $65 billion buildout it already has underway. These moves give Taiwan Semi greater opportunities to advance its relations with its existing domestic customers such as Nvidia, AMD, and Qualcomm.
Wall Street appears to be quite bullish about Taiwan Semi's prospects over the next few years -- as you can see in the chart of analyst estimates below -- and another big reason why relates to the custom silicon solutions being developed by cloud hyperscalers Microsoft, Alphabet, and Amazon, as well as ChatGPT developer OpenAI.
TSM Revenue Estimates for Current Fiscal Year data by YCharts.
Between the rising levels of AI infrastructure investment by big tech and the debuts of powerful new AI chip architectures, there's reason to expect demand for TSMC's output will keep growing for the long term.
TSMC's $916 billion market cap as I write this puts it roughly 9% away from a trillion-dollar valuation. I think the recent sell-off of its stock can be traced to ongoing uncertainty around tariffs and the macroeconomic outlook, as well as the broader tech sector correction. There isn't anything in TSMC's current financial picture or its outlook that would suggest that the company is in trouble or that a sell-off is warranted.
NYSE: TSM
Key Data Points
With a forward price-to-earnings (P/E) multiple of 19.5, TSMC is trading in line with its three-year average. However, the company's valuation is more of a bargain when compared to the forward P/E trend over just the last year, which peaked around 29.
I would pounce on the opportunity to buy this stock hand over fist before the company potentially reclaims its trillion-dollar valuation and soars even higher from there.
Image Source: Getty Images.
2. Broadcom
Broadcom (AVGO 1.88%) offers a host of AI-powered products and services, but primarily specializes in network equipment for data centers, as well as security solutions. It too is emerging as a major beneficiary from the increasing demand for custom silicon solutions.
NASDAQ: AVGO
Key Data Points
As the market cap figures below make clear, dips in Broadcom stock tend to be short-lived and are followed by compelling rebounds. I see the current sell-off in Broadcom as something more rooted in macro concerns around the economy as opposed to anything specific related to Broadcom's business.
AVGO Market Cap data by YCharts
For the last two years, the narratives on Wall Street around the AI hardware space focused heavily on GPUs, primarily those designed by Nvidia and AMD. While those GPUs are still very much part of the story, Microsoft, Amazon, Alphabet, and Meta could spend north of $320 billion on AI infrastructure this year across their own chipware, AI data centers, and more.
Given Broadcom's expertise in network infrastructure and security protocols for data centers, I think that its moment in the AI spotlight has finally arrived.
Broadcom CEO Hock Tan noted during the company's earnings call earlier this month that "two additional hyperscalers have selected Broadcom to develop custom accelerators to train their next-generation frontier models."
Given strong AI demand and Broadcom's important role in the data center market, I wouldn't worry too much about the current volatility. I'm optimistic that the company's growth will continue accelerating thanks to rising AI infrastructure spend and Broadcom's existing inroads with big tech -- particularly the cloud hyperscalers.
I anticipate investor confidence will begin to rise in the coming quarters should Broadcom continue executing in helping big tech build out AI infrastructure. For this reason, I think Broadcom will be back in the trillion-dollar club sooner than later.
