NVDA vs. TSM: Which Chipmaker Stock is Better?

At a P/E of 208.5 and a P/S of 38.3, NVIDIA initially looks massively overvalued versus its industry. However, the chipmaker’s five-year mean P/E is about 66.7, while its five-year mean P/S is about 17.7, showing that it typically trades far above its industry. Nonetheless, it seems clear from the headlines about NVIDIA that it’s in a bubble, suggesting a bearish view might be appropriate for now.

This year’s massive rally in NVIDIA shares has made the company into the next $1 trillion company, joining the few blockbuster Big Tech names like Apple and Microsoft in the over-$1 trillion-market-capitalization club. However, that rally also suggests NVIDIA could be a bubble stock, and if there’s one thing all investors know about asset bubbles, it’s that they pop — eventually.

At a P/E of 15.5 and a P/S of 6.4, Taiwan Semiconductor trades at a discount to its industry P/E and in line with its industry P/S. Thus, it looks much more reasonably valued than NVIDIA, especially considering its five-year mean P/S of eight. However, a neutral view might be appropriate in the near term due to the geopolitical overhang for Taiwanese stocks.