Anticipation: Two Artificial Intelligence Shares to Exceed Tesla's Value by Year's End 2025
Tesla's shares have seen a remarkable 50% surge over the past three months, fueled by expectations of advantages from CEO Elon Musk's relationship with President Donald Trump, particularly in the realm of autonomous vehicle regulations. With a market value of a staggering $1.3 trillion as of January 25, 2025, Tesla now ranks as the eighth largest company globally.
However, some Wall Street analysts assert that Broadcom and Taiwan Semiconductor Manufacturing Company (TSMC) will surpass Tesla's market value before the end of 2025. Let's delve into these tech giants.
1. Broadcom
Broadcom, a leading name in the semiconductor and infrastructure software industry, has carved out significant market shares. Its dominance in wireless chips, seen in Apple iPhones and certain Samsung Galaxy smartphones, and high-end Ethernet switch chips used in data center networking gear supporting AI workloads, are key contributions to its success.
Broadcom also heads the market for high-end application-specific integrated circuits (ASICs), crafting specialized chips for AI, with notable clients like Alphabet's Google, Meta Platforms, and ByteDance, among others. Recent announcements of two new hyperscale clients, rumored to be Apple and OpenAI, further underscore Broadcom's momentum in AI semiconductors.
Broadcom reported strong Q4 financial results in fiscal 2024, with sales rising by 51% to $14 billion. However, organic growth increased only 11% due to the influence of VMware acquisition. Meanwhile, non-GAAP earnings grew by 28% to $1.42 per diluted share. Analysts anticipate an 29% adjustment in Broadcom's earnings for the following four quarters, suggesting a reasonable valuation of 50 times adjusted earnings.
2. Taiwan Semiconductor
Taiwan Semiconductor Manufacturing Company (TSMC) holds the title of the largest contract chipmaker, dominating the semiconductor manufacturing field with a market share of 64% — an important competitive advantage. The company's massive investment in research and development allows it to maintain its leading edge in process technology, which results in compact and power-efficient chips, enhancing its pricing power and making it the go-to manufacturer for the most sophisticated semiconductors.
In Q4, TSMC surpassed estimates on both the revenue and earnings fronts. Its revenue soared by 37% to $27 billion, boosted by strong demand for its advanced 3-nanometer and 5-nanometer chips for high-performance computing and smartphones. Operating margin expanded by 7 percentage points, and net income rose by 55% per ADR to $2.24.
Anticipating an 17% increase in TSMC's earnings for the following four quarters, the current valuation of 31.5 times earnings appears reasonable. However, TSMC projects its AI accelerator revenue to double in 2025, and overall sales to rise in the mid-20% range. This growth potential could support TSMC's share price increase by 23%, potentially placing its market value above that of Tesla by 2025.
However, it's essential to consider that most Wall Street analysts expect Broadcom shares to decline in the short term, indicating a median 18% reduction in share price from its current standing. Yet, analysts like Joseph Moore at Morgan Stanley view Broadcom as an attractive investment opportunity in the AI semiconductor sector, advocating for a small initial investment.
Given the current market trends and expectations, investors may want to consider diversifying their portfolios to include both Tesla and these tech giants. While Broadcom and Taiwan Semiconductor Manufacturing Company (TSMC) are predicted to surpass Tesla's market value, their dominance in their respective sectors, particularly in AI semiconductors, could yield significant returns. On the other hand, investing in Tesla keeps alive the potential for profits due to its strong position in the electric vehicle market and the leadership of Elon Musk. In the world of finance, balanced investing strategies often lead to sustainable growth.
