Apple (AAPL +1.75%) and Taiwan Semiconductor Manufacturing (TSM +1.22%) have been partners for a long time. Their relationship is pretty simple: Apple designs the chips, then gives those designs to Taiwan Semiconductor to manufacture. This relationship has worked out well over the past few years, and has allowed Apple to become one of Taiwan Semiconductor's largest clients.
But based on the stocks' valuations and how each company expects to grow, I think only one of them is a smart buy right now.
Image source: Getty Images.
Apple's new chip uses Taiwan Semiconductor's most advanced technology
Apple's new A20 Pro chip appears in its newly launched iPhone 18 Pro and Pro Max, as well as its new folding smartphone, the iPhone Duo. The biggest advancement of this chip is that it uses Taiwan Semiconductor's cutting-edge 2-nanometer (nm) chip production process versus the last generation's 3nm process. This packs more transistors onto a chip in a tighter area and delivers better computing power while reducing energy consumption. That's a win-win for device users, but what about the stocks?
NASDAQ: AAPL
Key Data Points
Apple's business is fairly focused: It aims to provide the world's best consumer tech hardware. It has long accomplished that goal with leading smartphones and laptops, but one area where it has clearly fallen behind its peers is in artificial intelligence (AI). Sure, there could be some debate as to the usefulness of some of its competitors' AI features. Still, Apple Intelligence has thus far not lived up to the hype, which could be a problem in the coming years as AI features become more popular and advanced.
Prior to the AI infrastructure build-out, Apple was consistently Taiwan Semiconductor's largest customer, but surging demand for data center GPUs has changed the picture. In 2023, 2024, and 2025, one client (largely assumed to be Apple) made up 25%, 22%, and 19% of TSMC's sales, respectively. TSMC's second-largest customer made up 11%, 12%, and 17% of revenue in those years, and that's widely assumed to be Nvidia (NVDA -0.03%). But according to various media reports and Nvidia CEO Jensen Huang, Nvidia recently overtook Apple as TSMC's top client due to the accelerating AI infrastructure build-out. With heavy data center construction expected to last for several more years, Apple may take a back seat to Nvidia with the foundry giant, which could also cost Apple some bargaining power.
NYSE: TSM
Key Data Points
Apple is a case of a company not embracing AI right now, while Taiwan Semiconductor is running toward it. I think that puts TSMC in a better position moving forward, and it's already showing up in its growth rate.
Taiwan Semiconductor looks like the far better buy
In 2026, Wall Street analysts expect Taiwan Semiconductor's revenue to grow at a 43% pace in New Taiwan dollars. In 2027, that figure is expected to be 34%. Apple isn't even close, with this year's expected revenue growth to be about 15% and next year's at 10%. One factor that might change this is a subscription AI model from Apple; that could provide its financials with an instant boost. But it may have lost that race already, as there are several great AI options available for iPhone users.
With Apple growing more slowly and maybe missing out on the chance to capitalize on one of the biggest technological revolutions of our time, TSMC looks to be a far better buy. When you take a look at their stock valuations, this hypothesis is confirmed.
Despite Apple's less energetic growth outlook, it trades at a massive premium to Taiwan Semiconductor.
AAPL PE Ratio (Forward) data by YCharts.
With TSMC expected to outgrow Apple next year and trading at a lower valuation, I don't think there's really much of a debate as to which stock is the better buy. Taiwan Semiconductor is a far better investment than Apple right now, and I think investors will be very happy if they purchase TSMC instead of Apple over the next few years.
