Apple has a market capitalization of about $4 trillion at the time of writing. But artificial intelligence (AI) is shifting more of the value creation toward the companies that supply the chips powering consumer devices and data centers.
Broadcom (AVGO 0.89%) and Taiwan Semiconductor Manufacturing (TSM 0.93%) each have market caps around $1.9 trillion at the time of writing, and both are growing revenue and earnings meaningfully faster than Apple.
If either company can double its market cap by 2028, it could challenge — or even surpass — Apple’s valuation. It might be a tall task given the potential risks for semiconductor stocks. Still, if Broadcom and TSMC merely deliver on analysts’ earnings growth projections, these stocks could offer substantial upside over the next few years.
Image source: Getty Images.
1. Broadcom
Broadcom sells high-speed networking hardware, software, and custom AI accelerators. That mix is driving strong results, including 28% year-over-year revenue growth last quarter. By contrast, Apple’s revenue grew 16% year over year in a seasonally strong December-ending quarter. To catch Apple, Broadcom needs to at least double in value, and it’s already delivering enough growth to do that.
Custom chips are scaling alongside Nvidia‘s general-purpose graphics processing units (GPUs). These specialized accelerators can be more cost-effective for certain AI workloads where Nvidia’s top-end GPUs would be too expensive or unnecessary. For Broadcom, this business has been booming, pushing AI semiconductor revenue up 74% year over year in the most recent quarter.
Today’s Change
(-0.89%) $-3.61
Current Price
$402.93
Key Data Points
Market Cap
$1.9T
Day’s Range
$401.37 – $406.15
52wk Range
$161.61 – $414.61
Volume
91K
Avg Vol
26M
Gross Margin
64.96%
Dividend Yield
0.61%
Analysts expect Broadcom’s earnings per share to grow at an annualized rate of 41% over the next several years, versus about 11% for Apple. If Broadcom maintains a similar price-to-earnings multiple, that level of earnings growth could be enough to more than double the stock and lift its market cap to more than $4 trillion.
The main risk is customer concentration: Broadcom depends on a small group of six AI customers. A pause in spending could pressure business performance and the stock.
Still, Broadcom says it has visibility into more than $100 billion in AI chip revenue through 2027. Broadcom shares currently trade at 35 times this year’s earnings estimate, but just 22 times next year’s. Investors may be undervaluing the long-tail demand from AI, which could support a higher earnings multiple and push Broadcom’s valuation past Apple.
Image source: The Motley Fool.
2. Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing may be the most critical company in the AI supply chain. It manufactures chips for Nvidia, Apple, and even Broadcom.
TSMC has exposure across smartphones, PCs, and data centers, with AI now a major growth driver. In the first quarter, revenue growth accelerated to 40% year over year. Management expects AI chip demand to grow more than 50% annually through 2029.
Taiwan Semiconductor Manufacturing
Today’s Change
(-0.93%) $-3.46
Current Price
$367.04
Key Data Points
Market Cap
$1.9T
Day’s Range
$365.56 – $369.60
52wk Range
$145.84 – $390.20
Volume
99K
Avg Vol
14M
Gross Margin
61.02%
Dividend Yield
0.90%
TSMC controls 72% of the foundry market, according to Counterpoint Research. With demand pushing capacity to the limit, growth is translating into strong margins and profitability. Analysts expect earnings per share to rise at an annualized rate of 27% over the next several years.
CEO C.C. Wei put it simply on the company’s earnings call, saying, “Our conviction in the multi-year AI megatrend remains high, and we believe the demand for semiconductors will continue to be very fundamental.”
Despite its dominance, the stock trades at about 25 times this year’s consensus earnings estimate. If TSMC delivers on earnings growth and trades at a modestly higher earnings multiple, the stock could more than double by 2028 and potentially lift its market cap beyond $4 trillion.
Risks include a severe global recession and, more importantly, geopolitical conflict between Taiwan and China that disrupts chip supply. Either of these risks would likely send the stock down.
But the setup is straightforward. AI-related chip demand is expected to remain robust through the end of the decade, creating a path for leading semiconductor suppliers to outperform Apple in its more mature consumer device market.
For patient investors, Broadcom and TSMC offer exposure to two dominant businesses at the heart of an AI-driven economy.
