Semiconductor stocks have been in fine form on the stock market since the beginning of 2023, thanks to the terrific demand for chips used to power artificial intelligence (AI) servers, smartphones, and personal computers, among other things. The PHLX Semiconductor Sector index has shot up a terrific 115% since the beginning of last year, driven by the outstanding gains that the likes of Nvidia have clocked during this period.

More specifically, Nvidia stock has multiplied 8x since the start of 2023, and its market cap now stands at $3.0 trillion. However, the stunning rally in Nvidia stock has made it expensive with a price-to-earnings (P/E) ratio of 73, significantly more expensive than the Nasdaq 100's average P/E ratio of 32.

But Nvidia may be able to justify its valuation in the long run thanks to the huge opportunity in the AI chip market, where it is the dominant player. However, there is another semiconductor stock that is much cheaper and also enjoying healthy growth in this industry: Taiwan Semiconductor Manufacturing (NYSE: TSM). Popularly known as TSMC, the foundry giant could soon join Nvidia in the trillion-dollar market cap club. 

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Source Fool.com