I Can Only Pick One Stock for My $10K—Should It Be Broadcom or Taiwan Semiconductor?

With the semiconductor stocks slowing down to start the year, contrarians may have an opportunity to put a bit of new money to work. Undoubtedly, if you’ve got a chunk of cash to put to work in the space (let’s say $10,000) or so, perhaps splitting between two or even three semi names could make a lot of sense if you’ve got limited exposure to the scene. That said, at any given time, there’s always a better value for your money. And in this piece, we’ll explore two attractively-valued names to play the semi space.

In this piece, I’ll weigh in on whether Broadcom (NASDAQ:AVGO | AVGO Price Prediction) or Taiwan Semiconductor (NYSE:TSM) is the better bet for the new year.

Broadcom

Broadcom stock has taken its choppiness to the next level following its post-earnings spike enjoyed back in mid-December. Though shares of AVGO could consolidate wildly for some time, as profit-takers and new money flow out of and into the stock, respectively, I do think that long-term thinkers who believe in the company’s role in empowering other companies to build their own chips may wish to treat any pullbacks as opportunities to initiate a position or add to an existing one.

Recently, J.P. Morgan (NYSE:JPM) noted that Broadcom could gain as Arm Holdings (NASDAQ:ARM) builds its own chips.

Undoubtedly, as more firms roll up their sleeves to in-house their silicon to reduce or even eliminate dependence on third-party chip suppliers, Broadcom stands to gain.

Additionally, ASICs (application specific integrated circuits) stand out as the right way to go after DeepSeek shocked the world with its efficiency gains. As the AI boom advances, efficiency on the front of software and hardware will likely be needed to pull further ahead in the AI race.

Taiwan Semiconductor

The semi world still depends greatly on the newly-minted $1 trillion firm Taiwan Semiconductor. After gaining 62% in the past year, shares seem to be on the pricier side of the historical range at 29.5 times trailing price-to-earnings (P/E). In any case, the higher price tag may be more than worth paying as AI chip demand is still expected to keep the foundry giant operating at full capacity through the year. Of course, the DeepSeek R1 situation is worth monitoring closely, especially if the tech titans consider pulling back on their ambitious AI spending plans.

Thus far, they don’t seem to be all too willing to lift their foot off the accelerator. In fact, the big spenders seem more than confident about continuing forward with their aggressive AI strategies. While the DeepSeek impact is noteworthy, some of the biggest and brightest minds in AI don’t view the “breakthrough” as all too striking. For now, only time will tell if spending on AI chips will be in a spot veer off course. Most signs suggest it’s full-speed ahead in the same direction mega-cap tech was moving toward before DeepSeek landed.

Add recent reports swirling around Taiwan Semiconductor’s potential takeover of the manufacturing business of Intel (NASDAQ:INTC) into the equation, and TSM stock may have enough fuel to sustain a move higher after recently correcting off all-time highs hit in January. Moving ahead, the big question, I believe, won’t be on where demand will be but how Taiwan Semiconductor can deal with its supply-side contraints.

Of course, if DeepSeek’s impact cuts deeper into longer-term AI chip demand and spending budgets, perhaps TSM stock could take a further hit. Until big tech cuts deeply into their spending plans, though, I wouldn’t bet against Taiwan Semiconductor.

The bottom line

It’s tough to choose between AVGO and TSM. If I had to go with one, it’d have to be AVGO. The custom silicon trend is a powerful one that could help the firm be one of the better performers in the Magnificent Eight (Mag Seven plus Broadcom).