TSMC, the global foundry leader.
The AI wave continues to boost the semiconductor industry. Broadcom and TSMC are both important beneficiaries of the global AI supply chain. However, the business models, financial performance and stock valuations of the two companies are different. Foreign media "The Motley Fool" analyzed that Broadcom continues to expand its growth momentum with its customized AI chips, network equipment and enterprise software businesses. However, TSMC not only has faster revenue growth and stronger profitability, but its current stock valuation is also relatively cheap. Taking into account both growth and investment value, TSMC may be a more worthy purchase target in 2027.
The report pointed out that Broadcom mainly designs customized AI accelerators, network chips and connection solutions, and also owns VMware enterprise software business. Revenue in fiscal year 2025 will reach US$63.9 billion, an annual increase of 23.9%, net profit will be US$23.1 billion, and net profit rate will be 36.2%. Among them, AI semiconductor revenue increased significantly by 65%, reaching US$20.2 billion, and infrastructure software revenue also increased by 26%, reaching US$27 billion, becoming an important source of growth other than the semiconductor business.
However, Broadcom's top five terminal customers account for about 40% of annual revenue. The customer concentration is relatively high, and it is highly dependent on TSMC for foundry. If major customers reduce AI spending, or the supply chain is affected by geopolitics, it may affect operations.
In comparison, TSMC’s financial performance is even more impressive. Revenue in 2025 will be approximately US$122.4 billion, an annual increase of 35.9% in US dollars, net profit will reach US$55.2 billion, and net profit margin will be as high as 45.1%. As the demand for AI and high-performance computing chips increases, the importance of advanced processes continues to increase. In 2025, TSMC's most advanced process revenue will account for 74% of total wafer sales, up from 69% in 2024, highlighting its leading position in the high-end chip manufacturing market.
In terms of financial structure, TSMC's debt-to-equity ratio is about 0.2 times, and its current ratio is 2.5 times, both better than Broadcom's 0.8 times and 1.7 times. Its free cash flow in 2025 is about US$32 billion, which is also higher than Broadcom's US$26.9 billion, showing that even if it needs to invest a lot of capital expenditures to expand production capacity, it still has stable cash creation capabilities.
Of course, TSMC also has risks that it must face. Since the main manufacturing base is concentrated in Taiwan, geopolitical tensions may affect the supply chain and market confidence; in addition, maintaining technological leadership requires continuous investment in huge capital expenditures. Once AI demand cools or the semiconductor boom weakens, it may also put pressure on cash flow and profits. In addition to the problem of customer concentration, Broadcom's enterprise software business also faces challenges such as integration, supervision and market competition.
From a stock valuation perspective, TSMC is also cheaper than Broadcom. Broadcom's current estimated price-to-earnings ratio is 27.9 times, and its stock price-to-sales ratio (P/S) is 17.5 times; TSMC's estimated price-to-earnings ratio is 24.2 times, and its stock price-to-sales ratio is 13.9 times. In other words, TSMC not only has better revenue growth and net profit margin than Broadcom in 2025, but its stock valuation is also relatively low.
Analysts believe that Broadcom's customized AI chips, network solutions and enterprise software businesses still have room for growth, but the current stock price has reflected the market's high expectations for future growth. Coupled with the concentration of major customers, once AI investment spending slows down, the stock price may face pressure.
Although TSMC has geopolitical and capital expenditure risks, it has shown advantages in terms of revenue growth, profitability and valuation. Overall, if investors want to seize opportunities for continued growth in the AI industry and consider whether the stock price is reasonable, TSMC has achieved a better balance between growth, valuation and risk, and is therefore considered to be an AI concept stock worth buying in the year 2027.
