Compare Applied Materials, Inc. (AMAT) vs Taiwan Semiconductor Manufacturing Company Limited (TSM) Stock

Taiwan Semiconductor Manufacturing Company Limited (TSM) offers the better valuation at 35.1x trailing P/E (0.8x forward), making it the more compelling value choice. Analysts rate Applied Materials, Inc. (AMAT) a "Buy" — based on 53 analyst ratings — the highest consensus in this comparison. The "better buy" depends entirely on your goals: growth investors should weight revenue trajectory, value investors should weight P/E and PEG, and income investors should weight dividend yield and streak.

On trailing P/E, Taiwan Semiconductor Manufacturing Company Limited (TSM) is the cheapest at 35.1x versus Applied Materials, Inc. at 43.0x. On forward P/E, Taiwan Semiconductor Manufacturing Company Limited is actually cheaper at 0.8x. The PEG ratio (P/E divided by earnings growth rate) is the most growth-adjusted single valuation metric: Taiwan Semiconductor Manufacturing Company Limited wins at 0.03x versus Applied Materials, Inc.'s 1.97x — a PEG below 1.0 traditionally signals the market is underpricing earnings growth.

Over the past 5 years, Applied Materials, Inc. (AMAT) delivered a total return of +210.0%, compared to +196.8% for Taiwan Semiconductor Manufacturing Company Limited (TSM). A $10,000 investment in AMAT five years ago would be worth approximately $31K today (assuming dividends reinvested). Over 10 years, the gap is even starker: AMAT returned +1926% versus TSM's +1552%. Past returns do not guarantee future results, and the stock with the higher historical return may already have its best growth priced in.

By beta (market sensitivity over 5 years), Taiwan Semiconductor Manufacturing Company Limited (TSM) is the lower-risk stock at 1.44β versus Applied Materials, Inc.'s 1.66β — meaning AMAT is approximately 15% more volatile than TSM relative to the S&P 500. On balance sheet safety, Taiwan Semiconductor Manufacturing Company Limited (TSM) carries a lower debt/equity ratio of 18% versus 32% for Applied Materials, Inc. — giving it more financial flexibility in a downturn.

Taiwan Semiconductor Manufacturing Company Limited (TSM) is the more profitable company, earning 45.1% net margin versus 24.7% for Applied Materials, Inc. — meaning it keeps 45.1% of every revenue dollar as bottom-line profit. Operating margin tells a similar story: TSM leads at 50.8% versus 29.2% for AMAT. At the gross margin level — before operating expenses — TSM leads at 59.9%, reflecting greater pricing power or product mix advantage. Stronger margins indicate durable pricing power, lower cost of revenue, or higher mix of software/services. They are one of the clearest signs of business quality.

The PEG ratio (forward P/E divided by expected earnings growth rate) is the most precise measure of undervaluation relative to growth potential. By this metric, Taiwan Semiconductor Manufacturing Company Limited (TSM) is the more undervalued stock at a PEG of 0.03x versus Applied Materials, Inc.'s 1.97x. A PEG below 1.0 is traditionally considered the threshold for growth-adjusted undervaluation. On forward earnings alone, Taiwan Semiconductor Manufacturing Company Limited (TSM) trades at 0.8x forward P/E versus 33.9x for Applied Materials, Inc. — 33.0x cheaper on a one-year earnings basis. Analyst consensus price targets imply the most upside for AMAT: 13.0% to $420.83.

All stocks in this comparison pay dividends. Taiwan Semiconductor Manufacturing Company Limited (TSM) offers the highest yield at 0.8%, versus 0.5% for Applied Materials, Inc. (AMAT).

For long-horizon retirement investors, Taiwan Semiconductor Manufacturing Company Limited (TSM) is the stronger choice — it scores higher on the combination of lower volatility, dividend reliability, and long-term compounding (0.8% yield, +1552% 10Y return). Applied Materials, Inc. (AMAT) carries a higher beta of 1.66 — meaning larger drawdowns in market downturns, which matters significantly when you cannot wait years for a recovery. Both have compounded well over 10 years (TSM: +1552%, AMAT: +1926%), confirming both are viable long-term holds — but the lower-volatility option typically results in less emotional selling during corrections. Retirement portfolios generally favour predictability over maximum returns. Consult a financial advisor before making allocation decisions.

Both stocks operate in the Technology sector, making this a peer-level intra-sector comparison — the same macro tailwinds and headwinds will affect both. TSM pays a dividend while AMAT does not, making them suitable for different income and tax situations. These fundamental differences mean investors should not choose between them on a single metric — the "better stock" depends entirely on which of these characteristics aligns with your investment strategy.