Recent developments in the semiconductor industry have garnered attention, particularly following President Donald Trump's decision to adopt a more lenient stance towards Taiwan Semiconductor Manufacturing Company (TSMC). This shift comes in light of TSMC's announcement regarding a substantial $100 billion investment aimed at establishing advanced chipmaking facilities in the United States. With this new investment, TSMC's total financial commitment in the U.S. has now surged to $165 billion. Notably, the exemption of semiconductor imports from reciprocal tariffs appears to be a significant factor affecting this decision.

The prevailing sentiment among analysts is that semiconductor stocks may face reduced headwinds amid the ongoing trade war. William Stein, an analyst at Truist Securities, emphasized that the race to develop artificial intelligence (AI) applications—despite their costly nature—by clients of leading firms such as Nvidia and Broadcom, could sustain their robust growth trajectories.

Both Nvidia and Broadcom are recognized as fabless chipmakers, relying on the expertise of TSMC, a Taiwan-based semiconductor manufacturing giant, to produce their chips. Following the announcement of new tariffs, both companies experienced a significant sell-off. Nvidia's stock price plummeted by 13%, while Broadcom faced a similar decline. The imposition of a 32% import tax on products imported from Taiwan has heightened concerns among investors.

However, the recent sell-off within the Nasdaq has opened doors for savvy investors to acquire solid companies at more attractive valuations. Tech investors were jolted on April 3, as the Nasdaq Composite index saw a dramatic 6% decline in just one day, a reaction to the wide-ranging tariffs introduced by the Trump administration. This pattern of volatility is not unexpected; many experts predict that the trade war will escalate costs for tech companies that rely on overseas supply chains. Such anxiety has led to significant sell-offs in tech stocks, even as these companies have reported strong growth figures in recent months.

The heightened risk aversion among investors explains why many high-flying tech stocks, which were previously benefitting from the rapid integration of cloud computing and AI, have experienced substantial pullbacks. Since reaching a peak on December 16 of the previous year, the Nasdaq Composite has shed nearly 23% of its value, placing it firmly within bear territory.

In light of these challenges, Nvidia and Broadcom may find a way to keep their manufacturing costs manageable, allowing them to continue their impressive growth rates. Analysts predict that U.S. tech giants are poised to increase their capital spending for the year by 46%, totaling $325 billion as they invest heavily in AI infrastructure. Nvidia and Broadcom are likely to be key beneficiaries of this massive influx of investment.

Nvidia currently holds a commanding 92% market share in the AI data center graphics processing unit (GPU) market, while Broadcom claims a remarkable 70% of the custom AI chip market. Both sectors are projected to experience significant growth in the coming years. The market for AI GPUs is anticipated to grow at an annual rate of 31% through 2030, potentially generating annual revenues of $373 billion. Simultaneously, Broadcom's addressable market for custom AI processors could surpass $60 billion to $90 billion within the next three years.

This surge in demand has already translated into impressive financial performance for both companies. Nvidia reported a staggering 114% increase in revenue for the latest fiscal year, reaching $130.5 billion, alongside a 130% spike in earnings. Broadcom, on the other hand, saw a 25% rise in revenue in the first quarter of fiscal 2025, totaling $14.9 billion, with earnings jumping 45% over the same period.

Looking ahead, the potential for increased productivity and enhanced economic conditions driven by advancements in AI reinforces the sustainability of these significant infrastructure investments. Consequently, investing in Nvidia and Broadcom may prove to be a strategic long-term decision, particularly given their compelling valuations and significant upside potential.

The current market conditions suggest that both Nvidia and Broadcom represent enticing buying opportunities. Their recent revenue and earnings growth positions them favorably, and their current valuations make them attractive prospects for investors. Both stocks trade at identical forward-earnings multiples of 22. Furthermore, their price-to-earnings-to-growth (PEG) ratios indicate they are undervalued based on their growth prospects. Nvidia's PEG ratio stands at 0.91, while Broadcom's is even lower at 0.39, implying they offer attractive value.

Analysts are optimistic about the future performance of both stocks, with 91% of the 67 analysts covering Nvidia recommending it as a buy, projecting a median 12-month price target of $175—an 85% increase from current levels. Similarly, 89% of the 44 analysts covering Broadcom favor it as a buy, with a median price target of $250 that suggests a potential 70% rise in the next year.

This optimistic outlook is supported by projections that Nvidia's earnings could grow by 51% in the current fiscal year, while Broadcom is expected to see a 35% increase. Thus, investors contemplating a purchase of these AI stocks following their recent market pullbacks may find themselves in a position to capitalize on promising growth in the near future.

However, potential investors should also consider an important caveat. The Motley Fool Stock Advisor's analyst team has recently identified what they deem to be the ten best stocks to invest in at this moment, notably excluding Nvidia from this list. The historical performance of their stock recommendations suggests that following their advice could yield significant returns.

For context, had an investor purchased stock in Netflix when it made Stock Advisor's list on December 17, 2004, their initial $1,000 investment would have skyrocketed to approximately $461,558! Similarly, an investment in Nvidia on April 15, 2005, would have grown to around $578,035. The average total return from Stock Advisor is an astonishing 730%, significantly outperforming the S&P 500’s return of 147%.

In conclusion, while both Nvidia and Broadcom exhibit strong fundamentals and growth potential, it is essential for investors to weigh their options carefully and consider broader recommendations before making investment decisions. Each investment should align with individual goals and risk tolerance.