Better Chip Stock: Intel Versus Taiwan Semiconductor

Taiwan Semiconductor Manufacturing (NYSE: TSM) is the stalwart in the semiconductor foundry space. It has most of the major tech companies as clients and has earned its reputation as the best in the business. One of its competitors, Intel (NASDAQ: INTC), is trying to claw back to the top, but it's hard when the competition is so stiff.

However, if the only thing you had to judge by is Intel's stock performance, it would be easy to assume it's doing just that. So, which of these two chip stocks is the better buy? Let's find out.

Image source: Getty Images.

Taiwan Semiconductor owns the market

Taiwan Semiconductor (TSMC for short) is the largest chip foundry by far. It owns about 72% of the market, at least by revenue, according to Motley Fool research. Intel has far less, and it's grouped into the "other" category because its share is so low. That group consists of about 7% of revenue, making Intel a relatively minor player in the space.

But that could be changing. Intel has had some major investors come alongside it, namely the U.S. government and Nvidia, and that has turned its fortunes around. Recently, President Donald Trump announced that Apple and Intel have reached an agreement to use some of Intel's foundry services.

That's a major deal, because Apple gets its chips primarily from TSMC. While that may seem like a win for Intel, the reality is that TSMC has been focusing more of its attention on artificial intelligence chips than it has on Apple's, and Apple needs to find a second source in case it's pushed out of TSMC's services.

One knock against TSMC used to be that it has all of its operations on a tiny island just off the coast of mainland China, which China wants to be under its full control. That could present a geopolitical risk, but the chipmaker has also diversified its footprint by investing major capital in its U.S. production facilities.

While Intel is gaining momentum, I think that TSMC's business is still stronger overall. So, I'm giving it the win in this category, unless Intel can start taking more customers.

Winner: Taiwan Semiconductor

Taiwan Semiconductor's growth is impressive

Intel is still amidst a turnaround, so it shouldn't come as much of a surprise that TSMC is growing much faster.

INTC Revenue (Quarterly YoY Growth) data by YCharts; YoY = year over year.

This could flip-flop if Intel turns it around, but Wall Street analysts are hesitant to give it their vote of approval. In both 2026 and 2027, they expect 11% growth, which is far below TSMC's projections.

Because Intel's revenue growth is slow now and not expected to accelerate much in the future, TSMC easily runs away with this category.

Winner: Taiwan Semiconductor

Taiwan Semiconductor is the runaway winner

The last check is to compare valuations, and TSMC easily completes the sweep here with a far lower valuation.

INTC PE Ratio (Forward) data by YCharts; PE = price to earnings.

The market has priced in a lot of success that Intel hasn't achieved yet. Meanwhile, TSMC is valued at a premium to most big tech stocks, but it's still in a reasonable range that most investors would expect to pay for a best-in-class tech stock that's growing rapidly.

This isn't much of a contest, and it easily wins this category, too.

Winner: Taiwan Semiconductor

The far better investment

I think investors should buy Taiwan Semiconductor Manufacturing over Intel. It's the best-in-class business, operating at a high level, and is expanding into the U.S. to fulfill demand.

Meanwhile, investors are hoping that Intel turns it around. Hope isn't an investment strategy, and I think they should stick with the established player in this industry until Intel sees real signs of a turnaround in its finances, rather than just announcements.

Keithen Drury has positions in Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Apple, Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.