TSMC Outgrew Broadcom in 2025 and Still Trades Cheaper

Taiwan Semiconductor Manufacturing booked approximately $122.4 billion in fiscal 2025 revenue, up 35.9% in U.S. dollar terms, and still trades at a lower valuation than Broadcom — 24.2x forward earnings versus 27.9x — according to an analysis by The Motley Fool comparing the two AI infrastructure stocks heading into 2027.

The comparison matters because the two companies occupy very different positions in the chip ecosystem. Broadcom designs specialized connectivity chips, custom AI accelerators, and networking silicon, and it owns a massive enterprise software portfolio anchored by VMware. Taiwan Semiconductor acts as the primary factory for the world's most advanced processors. Both sit at critical points in the global AI supply chain. Their financial profiles, however, diverge sharply.

How did Broadcom's fiscal 2025 actually look?

Broadcom generated $63.9 billion in revenue in FY 2025, an increase of 23.9% year over year. Net income reached $23.1 billion, a 36.2% profit margin. The AI engine did most of the work: AI semiconductor revenue surged 65% to $20.2 billion, driven by demand for custom processors and networking infrastructure. Infrastructure software added another leg, growing 26% to $27 billion.

The balance sheet tells a more mixed story. Broadcom ended the year with a debt-to-equity ratio of roughly 0.8x and a current ratio of 1.7x. Free cash flow hit $26.9 billion — substantial cash generation despite significant debt obligations. But stock-based compensation represented about 27.5% of operating cash flow, a dilution risk shareholders can't ignore.

What about Taiwan Semiconductor's numbers?

TSMC's scale dwarfs its customer-turned-rival in comparisons. Net income reached $55.2 billion on that $122.4 billion revenue base, delivering a 45.1% profit margin — nearly nine points ahead of Broadcom. Growth came from strong demand for advanced manufacturing technologies, particularly processes used in AI and high-performance computing.

The leading-edge mix keeps shifting upward. TSMC's most advanced manufacturing processes accounted for 74% of wafer revenue in 2025, up from 69% in 2024, underscoring how much of the company's revenue now depends on cutting-edge nodes.

Financially, TSMC runs a cleaner book: a debt-to-equity ratio near 0.2x and a current ratio of 2.5x. Free cash flow reached roughly $32 billion in 2025 — remarkable given the heavy capital expenditures required to keep expanding manufacturing capacity.

Which company carries more risk?

Broadcom's problems concentrate in its customer list. Its five largest end customers account for approximately 40% of annual revenue. That's real exposure if AI spending slows. The company also depends heavily on Taiwan Semiconductor itself for chip manufacturing, which ties it to supply chain disruptions and geopolitical tensions in the region. Its large enterprise software business adds integration, regulatory, and competitive risks.

Taiwan Semiconductor faces geopolitical risk more directly, given its manufacturing concentration in Taiwan. Staying at the technological frontier demands enormous capital investment, which could squeeze cash flow if demand weakens. And like every chipmaker, TSMC rides the semiconductor cycle, leaving it exposed to shifts in AI infrastructure spending and broader economic conditions.

Why does valuation favor TSMC?

On both commonly used metrics, TSMC is cheaper. The comparison, using valuation data from Financial Modeling Prep:

Metric	Broadcom	Taiwan Semiconductor
Forward P/E	27.9x	24.2x
P/S ratio	17.5x	13.9x

The Motley Fool's verdict: Taiwan Semiconductor is the better buy for 2027. The analysis concludes that TSMC delivered stronger revenue growth and higher profit margins in 2025, yet trades at a discount to Broadcom on both forward earnings and sales multiples. Broadcom's premium valuation, in the analysis's view, reflects high expectations already priced in, and its reliance on a handful of major customers introduces risk if AI spending decelerates.

The caveat cuts both ways. Geopolitical tensions surrounding Taiwan and TSMC's substantial capital requirements remain real risks that investors need to weigh. But even after accounting for those concerns, The Motley Fool finds TSMC offers the more compelling balance of growth, valuation, and risk — a conclusion that, if AI infrastructure spending holds, positions the foundry's cheaper multiple and 74% leading-edge wafer mix as the stronger hand going into 2027.