Intel vs. Taiwan Semiconductor Manufacturing: Which Stock Will Outperform in 2026?

When it comes to chip manufacturing, Taiwan Semiconductor Manufacturing (NYSE: TSM) is the undisputed foundry leader, while Intel (NASDAQ: INTC) is trying to make inroads. However, in 2025, it was Intel's stock that outperformed, up nearly 80% as of this writing, compared to a 40% gain for Taiwan Semiconductor Manufacturing.

Let's look at which stock is set up to outperform in 2026.

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The case for Taiwan Semiconductor Manufacturing

Taiwan Semiconductor Manufacturing, or TSMC for short, is the world's largest semiconductor foundry on the planet. Due to its technological expertise and scale, the company manufactures the vast majority of advanced chips, such as graphics processing units (GPUs). It counts Nvidia, Apple, and Broadcom among its top customers.

In chip manufacturing, the goal is to consistently push down node sizes, which refers to the transistor density of the chips. The more transistors that can be fit on a chip, the more powerful and energy efficient they become. However, producing advanced chips at scale is difficult, and TSMC's main competitors, including Intel and Samsung, have struggled with yields (the number of defects per wafer). Meanwhile, nearly three-quarters of its production is at 7nm nodes and below, and it is set to move to 2nm technology next year.

Given its position in the industry, TSMC is the go-to partner for chip designers. It works closely with companies like Nvidia to grow capacity to meet their projected demand. And, as the only foundry that can really make these advanced chips at scale with high yields, it has also garnered strong pricing power. The company is set to raise prices once again next year, while the cost of its new 2nm processing technology is forecasted to be 50% higher than its 2nm technology.

TSMC is well-positioned to continue to benefit from the ongoing artificial intelligence (AI) infrastructure buildout and sees AI chip demand growing by more than a 40% compound annual growth rate (CAGR) over the next few years.

The case for Intel

Intel stock's outperformance in 2025 wasn't really a result of its operational performance. The company has struggled to grow its revenue, and it felt a lot of gross margin pressure in the first half of the year. However, it did see a huge rebound in adjusted gross margins in Q3, with it climbing from 18% a year ago to 40%. Revenue, meanwhile, edged up 3%.

The biggest reasons for Intel's gains in 2025 were from the high-profile investments others made into the company's stock. Nvidia made a $5 billion equity investment in the company, while SoftBank invested $2 billion. Meanwhile, the U.S. government made an $8.9 billion investment. These investments, along with the 51% sale of its Altera business for $5.2 billion, helped Intel end Q3 with nearly $31 billion in cash on its balance sheet.

The company will use that cash to keep building out its foundry business and advance its chip manufacturing technology. Meanwhile, it is collaborating with Nvidia on new products, including integrating its central processing units (CPUs) with Nvidia's NVLink system to allow its CPUs to communicate more quickly with Nvidia's GPUs. This would help give Intel a nice advantage in the data center CPU market, where it has been losing share to Advanced Micro Devices. Separately, Intel is also working on its own AI chips designed for inference, and it is supposedly close to a deal with SambaNova Systems to further its efforts in this area.

The verdict

Intel's 2025 performance was largely from events that won't repeat in 2026. For the company to outperform next year, it's probably going to need to win a large foundry customer or show major progress in data center chips, either with its CPUs or GPU efforts. That makes the stock more of a wildcard.

TSMC, meanwhile, is the much safer choice. The company is set to benefit from the continued AI data center buildout, and its path forward is much clearer. As such, it's my pick to outperform in 2026.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Intel, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.