Applied Materials vs. Taiwan Semiconductor Manufacturing: Which Tech Stock Is a Better Buy in 2026?
2026-10-01 01:14
•John Ballard •The Motley Fool
••••••• •• Axe Cap view
TSMC vs Applied Materials: Best Chip Play for 2026?
Comparing the world's top chip equipment supplier and foundry reveals a clear frontrunner for growth and value.
Applied Materials offers steady but slow growth, with a premium valuation that’s hard to justify given its 4.4% revenue rise in 2025. The $252 million export penalty and China tensions add to the risk. In contrast, Taiwan Semiconductor Manufacturing (TSMC) shines with 38% revenue growth and an impressive 45% net margin, dominating 73% of the chip foundry market. TSMC’s 22x forward P/E and 27% projected earnings growth look compelling, especially given the global push for AI chips. However, it’s worth remembering that its geographic concentration in Taiwan carries real geopolitical risk. For South African investors, the more interesting angle may be USD/ZAR exposure: a stronger rand could dampen returns when owning TSMC ADRs priced in dollars, while AMAT’s risks tied to China also feed through FX volatility. Still, the growth and valuation contrast tip the scales decidedly toward TSMC for now. this is just our opinion and not financial advice
Buy TSMC for growth exposure in AI-driven chip manufacturing but hedge currency risk if possible; avoid Applied Materials due to valuation and modest growth. Monitor USD/ZAR trends closely as they influence returns.
- TSMC
- USD/ZAR
- Geopolitical tensions in Taiwan
- USD/ZAR volatility
7/10
The article compares two semiconductor industry leaders: Applied Materials, which provides chip manufacturing equipment, and Taiwan Semiconductor Manufacturing (TSMC), the world's largest dedicated chip foundry. While AMAT showed modest 4.4% revenue growth in 2025, TSMC demonstrated stronger momentum with 38% revenue growth and a 45% net margin. The author recommends TSMC due to its dominant 73% market share in chip foundries, faster earnings growth projections (27% vs 17%), and lower forward P/E valuation (22x vs 29x), despite geopolitical risks concentrated in Taiwan.
Our take is based on reporting first published by The Motley Fool.