Good news from Taiwanese company Hon Hai Precision Industry (better known as Foxconn) benefited semiconductor stocks in general today. Foxconn reported 15% revenue growth to $63.9 billion in the fourth quarter of 2024, a figure that CNBC called a “superior sales performance.”

The associated strong demand for AI semiconductor chips led to shares of Taiwan Semiconductor Manufacturing Company (NYSE:TSM) to an all-time high at the opening bell on Monday. As of 10:35 a.m. ET, TSMC shares remained up a solid 4.9%. Shares of UCK (NASDAQ:KLAC) And Lam research (NASDAQ:LRCX)which supply both semiconductor manufacturing facilities to TSMC, performed even better with an increase of 5% and 5.8%, respectively.

Commenting on the results, CNBC noted that Foxconn saw “slight declines” in sales of PCs and smart consumer electronics, but its cloud and networking products, including servers that support AI capabilities, posted robust growth. Investors quickly concluded that the leading AI chip maker’s growth was likely to be good Nvidia and its contract manufacturer TSMC, as well as the companies that make the machines that allow TSMC to make these chips, KLA and Lam Research.

This thesis will be further strengthened on Friday Microsoft announced plans to “invest $80 billion to build AI-ready data centers to train AI models and deploy AI and cloud-based applications around the world.”

To cut a long story short: the AI ​​revolution seems far from over. Investors today buy stocks from virtually anyone and everyone involved in this industry.

That doesn’t necessarily mean You However, should buy AI stocks indiscriminately.

On the one hand, yes, if Foxconn’s good news and Microsoft’s massive investments mean AI growth continues in 2025, there are likely bargains to be had. TSMC stock, for example, is selling for about 28 times trailing earnings today, and Wall Street analysts agree that the stock will likely continue to post about 28% annual earnings growth over the next five years. This means that at least TSMC stock remains fairly valued.

KLA stock, on the other hand, costs more than TSMC (29x earnings vs. 28x), and the company is growing more slowly. Analysts are only forecasting a 15% long-term growth rate for KLA, which translates to a stock price-to-earnings-growth (PEG) ratio of nearly 2, which stretches the definition of what I would call a “fair price.” (KLA also pays a lower dividend yield than TSMC, just 1% as opposed to 1.7%.)

The story continues