Tuesday, October 19, 2021

Taiwan Semiconductor Manufacturing vs. NXP Semiconductors: Which Chip Stock is a Better Investment?

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Stock Markets43 minutes ago (Sep 28, 2021 05:30PM ET)

(C) Reuters. Taiwan Semiconductor Manufacturing vs. NXP Semiconductors: Which Chip Stock is a Better Investment?

The pandemic led to a surge in demand for semiconductors. This, in addition to supply disruptions from the coronavirus and stressed supply chains, has led to a shortage in semiconductors. This is leading to increased pricing power and well-known players in this space, Taiwan Semiconductor Manufacturing (TSM) and NXP Semiconductors (NASDAQ:NXPI) are benefitting. But which of these stocks is a better buy now? Let’s discuss.Taiwan Semiconductor Manufacturing Company Limited (TSM) and NXP Semiconductors N.V. (NXPI) are two well-known companies in the global semiconductor industry. Taiwan-based TSM manufactures and markets integrated circuits and semiconductor products. It provides wafer manufacturing, wafer probing, assembly, and testing, mask production, and design services. NXPI designs semiconductors and software for mobile communications, consumer electronics, security applications, in-car entertainment, and networking.

Despite the global chip shortage, the semiconductor industry witnessed a 29% year-over-year sales growth in July 2021. Moreover, the industry’s production is expected to increase, with governments across the globe investing heavily in the industry to eliminate the supply bottlenecks faced by several industries due to the chip shortage. Investor interest in the industry is evident from the SPDR S&P Semiconductor ETF’s (XSD) 2.6% gains over the past month versus the SPDR S&P 500 Trust ETF’s (SPY) negative returns. The global semiconductor market is expected to grow at 7.7% CAGR to $778 billion by 2026. So, both TSM and NXPI should benefit.

While TSM lost marginally over the past three months, NXPI surged 6.1%. In terms of the year-to-date price performance, NXPI is a clear winner with 36.3% gains versus TSM’s 6.5% returns. But which of these stocks is a better pick now? Let’s find out.

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Taiwan Semiconductor Manufacturing vs. NXP Semiconductors: Which Chip Stock is a Better Investment?

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