3 Stocks I'm Buying After Taiwan Semiconductor's Stellar Announcement

Taiwan Semiconductor Manufacturing (NYSE: TSM) just reported earnings, showcasing that the AI build-out is alive and well. This makes several stocks attractive buys, including TSMC itself. I'm also bullish on Nvidia (NASDAQ: NVDA) and Broadcom (NASDAQ: AVGO), as increased semiconductor demand means that these two will sell more chips.

That's a bullish combination, and if you've missed out on the massive gain of these three over the past few years, now is the perfect time to buy, as they're each on sale.

Image source: Getty Images.

1. Taiwan Semiconductor Manufacturing

TSMC has had a rough few weeks and is down about 15% from its all-time high despite reporting incredible second quarter earnings. When a company reports strong earnings and gives a rosy outlook, yet the stock doesn't rally, that's my sign as an investor that the market isn't fully buying what TSMC is selling, which leaves a great investment opportunity for individual investors who can be contrarian.

During Q2, TSMC's revenue increased 36% year over year (in New Taiwan Dollars), and earnings per share skyrocketed 77%, showcasing improving operating leverage. TSMC has a grip on the chip industry, as it's the only one with enough capacity and advanced enough technology to support a major AI computing build-out, so as long as demand persists, TSMC will be a great investment.

Speaking of investments, TSMC is planning to invest another $100 billion in its Arizona fabrication facilities, highlighting growing demand for chips.

If the AI build-out were nearing completion, TSMC would be more cautious to invest this large sum in new production. However, CEO C.C. Wei stated that strong chip demand will persist through 2029 or 2030. This bodes well for TSMC's future and the other two. It's a great buy now and will remain a top stock pick in the AI-fueled market.

2. Nvidia

Nvidia's stock has rallied over the past few weeks, but it's still down more than 10% from its all-time high. With TSMC's strong future projections, it's clear that Nvidia will be in a great spot, and Wall Street analysts back this up.

For the remainder of the current fiscal year, Wall Street analysts estimate 82% revenue growth for Nvidia and 42% next year. That's strong growth for the world's largest company, yet none of that is priced into the stock.

When you analyze Nvidia's stock price using next year's earnings estimates, it looks incredibly cheap, and I wouldn't be surprised to see it rally by the end of the year to bring its valuation back up, much like it has each of the past two years.

NVDA PE Ratio (Forward) data by YCharts

This bodes well for Nvidia's future, and I think it's one of the top stocks to buy in the market.

3. Broadcom

Broadcom is the furthest from its all-time high of the trio, recently down more than 20%. However, its future is arguably brighter than either Nvidia or TSMC.

For the remainder of this year and into next, Broadcom expects massive growth from its custom AI chip business. Next year, Broadcom expects $100 billion in AI semiconductor revenue, yet this division reported only $10.8 billion in revenue last quarter. This indicates huge, explosive growth over the next year and will transform Broadcom into a completely new business.

After Broadcom's sell-off, the stock is more reasonably priced at 32 times forward earnings, but it's still quite expensive overall. However, with major growth expected next year, looking at FY 2027 earnings estimates to value the stock is also smart (as with Nvidia). Broadcom trades for 19 times next year's earnings, which isn't a bad price to pay at all for a rising star in the AI world.

All three stocks are fantastic buys right now, and investors should be loading up on them before the market gets bullish on AI again.

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