TSMC’s Terrific Growth Clearly Shows That the Chip Sell-Off Is Overdone. Here Are the Best Stocks to Buy Hand Over Fist

In recent weeks, the semiconductor industry has faced a significant downturn, with the PHLX Semiconductor Sector index dropping 17% since October. However, major players in the sector, such as Taiwan Semiconductor Manufacturing (TSMC), are proving that the recent sell-off may have been overstated. TSMC's October sales figures reveal a strong recovery, with revenue soaring nearly 60% from the same period a year ago.

This surge in growth is fueled by the increasing adoption of artificial intelligence (AI) and open-source AI models. TSMC executives emphasize that the value of semiconductors in the global supply chain will continue to rise as the AI build-out gains momentum. Their revenue has already grown by 43.3% in the first ten months of 2026, suggesting they may surpass their 2026 revenue growth target of 44%.

Moreover, TSMC's long-term earnings per share (EPS) growth projections are on the rise. This makes investing in TSMC stock a prudent decision, especially considering its current price-to-earnings ratio of 18, which is attractive compared to its peers. While TSMC is a strong contender, another semiconductor stock, ASML Holding (ASML), is also worth considering.

ASML's stock has dropped 15% since October, trading at 23 times forward earnings, below its five-year average. ASML's growth is driven by its monopoly in extreme ultraviolet (EUV) lithography machines, which are crucial for manufacturing advanced AI chips. The company anticipates significant increases in capital expenditure, reaching between $60-$64 billion this year, up from $40.9 billion in 2025.

ASML expects its capital spending to remain significantly higher than the past three years. This trend is promising for ASML, as its demand for EUV lithography systems remains robust, outpacing production capacity. ASML is aiming to increase output by 30% in 2027 and potentially more in 2028. Investors should consider adding both TSMC and ASML to their portfolios, as they are poised to benefit from the AI-driven chip boom and are trading at favorable valuations.