Why stocks of Applied Materials, ASML Holding and Taiwan Semiconductor all surged on Wednesday

Wednesday is shaping up to be a good day for semiconductor investors, as good news out of China (and a potential cash grab from Taiwan) sends stock prices soaring Applied materials (NASDAQ:AMAT), ASML Holding (NASDAQ: ASML)And Taiwan semiconductor manufacturing company (NYSE:TSM).

As of 10:30 a.m. ET, Applied Materials stock is up 4.9% and ASML is up 7.4%. TSMC rebounded from yesterday’s decline with a 6.9% gain today.

Good news for semiconductor equipment stocks

Starting at the top of the supply chain, Applied Materials I earned an upgrade Since Barclays This morning. As analyst Tom O’Malley explains, he sees a “sharp increase” in orders for foreign semiconductor manufacturing equipment in China, as that country spends heavily to become self-sufficient in chipmaking. At the same time, O’Malley predicts that semiconductor manufacturers will invest “aggressively” in the United States, reaping subsidies from the United States. the American CHIPS law.

What’s good for Applied Materials should be just as good for rival ASML – so both stocks are rising side by side this morning.

Barclays also boosted TSMC stock today, raising its price target on the overweight stock to $170. The analyst highlighted demand for 2-nanometer chips as a “very, very big” profit driver for TSMC (as well as an incentive to spend on chipmaking equipment). The news follows a report yesterday that TSMC could raise prices on its chip manufacturing contracts – in an attempt to grab a bigger share of the huge profits that represents. Nvidia (NASDAQ:NVDA) is interested in artificial intelligence chips.

Which Semiconductor Stock Should You Buy?

So we have three solid chip stocks to consider today. Which would be I buy?

None of the three look cheap, with TSMC stock costing almost 30 times trailing earnings, Applied Materials 24 times, and ASML stock twice that, at 48 times trailing earnings. However, of the three, TSMC has the fastest growth rate at just over 20%, giving it a PEG ratio of 1.5, compared to 2.4 for Applied Materials and ASML.

This makes TSMC the closest to a “buy.”

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