My Top 3 Chip Stocks for 2025 Crushed the Market. Here's Why They Can Repeat Again in 2026.

If you followed my advice for the three chip stocks I recommended in 2025, you're probably a happy investor. I recommended you purchase Nvidia (NASDAQ: NVDA), Taiwan Semiconductor Manufacturing (NYSE: TSM), and ASML Holding (NASDAQ: ASML) for 2025, and if you did that and held on, you made a huge profit.

The "worst" performer (if you can even call it that) was Nvidia, which rose 39%. Taiwan Semiconductor and ASML each increased by 54%, delivering monstrous gains. Regardless of whether you followed my advice or not, every investor must make a decision on whether these stocks are worth holding on to or buying more of in 2026. I think there are two I'd much rather own, although each of them could still beat the market.

Image source: Getty Images.

Each stock represents a different part of the chip supply chain

These three companies all play different roles in the chip industry. Nvidia designs chips, specifically for its graphics processing units (GPUs). GPUs have become the top option to train and run generative AI workloads, and the demand they have created is unprecedented. However, Nvidia only designs the chips; it doesn't manufacture them.

That's where Taiwan Semiconductor comes in. It operates a chip factory where clients can give it designs, and it produces them. This is a great relationship, as it allows Taiwan Semiconductor to stay neutral. It's only offering its foundry capabilities, versus competing against Nvidia. Part of the reason companies like Nvidia don't produce their own chips is the massive amount of equipment and expertise required to manufacture cutting-edge chips. This process requires expensive and specialized machines, such as those made by ASML.

ASML makes extreme ultraviolet lithography machines, which help lay the tiny electrical traces on chips. ASML is the only company in the world with this technology, so it's guaranteed growth as long as chip demand continues to rise.

All three of these companies are vital, but which ones are buys for 2026?

ASML has gotten expensive for its growth

For the next fiscal year, Wall Street analysts expect 51% growth for Nvidia, 31% for Taiwan Semiconductor, and 15% from ASML. There's a clear break in expectations for these three. Yet they trade at differing valuations.

ASML trades for 34 times forward earnings, while Nvidia and Taiwan Semiconductor trade for 25 and 21 times forward earnings, respectively. ASML has gotten too expensive for its relatively slow growth rate, so I think Taiwan Semiconductor and Nvidia are much better buys. While ASML can still deliver strong results, I'm more confident in the other two for 2026.

Keithen Drury has positions in Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends ASML, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.