The trillion-dollar club got a little bit smaller over the last few weeks.
Tesla(NASDAQ: TSLA), Broadcom(NASDAQ: AVGO), and Taiwan Semiconductor Manufacturing(NYSE: TSM) all got the boot as part of the broader sell-off in stocks that hit tech companies particularly hard. All three now sit around a market cap of $800 billion as of this writing.
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Long-term investors can reasonably expect the three mega-cap stocks to make a run at $1 trillion again, but one stands out as a shoe-in to get there first.
Image source: Getty Images.
Revoking their memberships
All three stocks have struggled since January.
That month, DeepSeek unveiled its R1 reasoning model, which was trained using intentionally limited Nvidia graphics processing units (GPUs) designed for the Chinese market. The AI company estimated that its training costs were an order of magnitude less than leading competitors like OpenAI. It also showed advances in bringing down the cost of inference.
The reveal sent shockwaves through the semiconductor industry, as investors digested the idea that developers didn't need to spend so heavily on the most cutting-edge hardware to stay ahead in AI. Software optimization could prove more effective than brute force processing power.
On top of that, tariffs against Taiwan could negatively affect the cost of chips designed by Broadcom and produced by TSMC, reducing unit demand among the cloud computing customers that buy Broadcom's products.
Meanwhile, Tesla will see production costs rise as imported parts prices increase, and it will struggle to sell cars in countries that enact reciprocal tariffs, particularly China. Tesla has stopped selling the Model S and Model X in China as a result. The American automaker was already losing market share to Chinese brands in Asia and Europe, but the effect of tariffs made things worse.
Tesla's bigger challenge is the backlash against CEO Elon Musk, who has inserted himself into involvement with the United States government as head of the Department of Government Efficiency. His rhetoric and actions have led much of Tesla's core customer base (environmentally conscious progressives) to abandon the brand. That's seen in Tesla's first-quarter sales, which dropped 13% year over year.
As investors digest the rapidly changing economic environment, it's hard to determine whether these stocks trade at a fair price, if they're still overvalued, or if they've fallen too far. But one stands out as more resilient than others, and its stock looks extremely attractive at this price point.
Here's who will rejoin the trillion-dollar club first
In times of economic uncertainty, the company with the strongest competitive advantage typically separates itself from the crowd.
Tesla has seen people shift their purchases to different automakers, and its high-end vehicles won't fare well if we find ourselves in a recession. Its planned launch of a robotaxi service later this year could face challenges from competition that's proven and launched well ahead of Tesla as well.
Broadcom has a clear lead in the market for networking chips, but its artificial intelligence accelerator chips face significant competition from other chipmakers. While Broadcom has a couple of major hyperscale cloud customers (and more on the way), it could face challenges if developers shift workloads to other cloud providers using different hardware.
Taiwan Semiconductor could face a slowdown in demand from tariffs, but chipmakers have practically no other options for printing and packaging advanced chips at scale. TSMC is one of just a handful of manufacturers capable of printing 3-nanometer chips, and it's the only one able to keep up with the massive demand for AI chips.
That competitive strength is one reason why management reiterated its 2025 guidance alongside its stellar first-quarter earnings report this month. It also plans to move forward with its capital expenditure budget of between $38 billion and $42 billion for the year, suggesting it doesn't see a significant slowdown in demand for AI chips. Its second-quarter guidance exceeded expectations, calling for 12% growth.
That speaks to the pricing power of, and strong demand for, the advanced semiconductors that TSMC is uniquely capable of producing. The effect of tariffs has yet to show up in its earnings forecast, and it might never show up due to its massive competitive advantage in the market.
Nonetheless, the stock has dropped as if tariffs will wipe out a significant portion of its revenue growth. Shares now trade for less than 17 times forward earnings estimates, well below both Broadcom and Tesla. At the same time, it's proven more resilient, with expectations for mid-20% revenue growth through 2029 and strong profit margins. The stock should return to the $1 trillion valuation much faster than its fellow former members of the elite club.
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Adam Levy has positions in Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Nvidia, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
