AI Stock Market Correction: Two Semiconductor Leaders Stand Out as Valuations Reset

As the market braces for Nvidia’s earnings announcement, a wave of profit-taking has swept through technology and chip stocks, creating potential entry points for disciplined investors. This correction, while unsettling in the short term, reflects a healthy market adjustment after the Nasdaq’s impressive 45% rally since early April. Before the semiconductor sector’s biggest earnings event drops, let’s examine two companies positioned at the heart of the AI infrastructure boom: Taiwan Semiconductor Manufacturing and Vertiv.

Vertiv: The Unsung Infrastructure Player Benefiting From AI Buildout

While chip designers grab headlines, the companies enabling AI data centers operate largely behind the scenes. Vertiv Holdings Co (VRT) represents exactly this type of opportunity. Working directly with major semiconductor companies to solve critical cooling and power challenges in AI data centers, Vertiv has positioned itself as an essential partner in the AI infrastructure race.

The company’s recent third-quarter performance and updated guidance emphasized growth in what it describes as the “fast-growing, AI-driven market.” Vertiv projects revenue expansion of 28% through 2025 and an additional 21% growth in the following year, reaching approximately $12.32 billion by fiscal 2026—more than doubling its revenue from 2022’s $5.69 billion level.

Earnings growth proves even more impressive. Adjusted earnings per share are forecast to climb 44% in 2025 and 26% in 2026, building on the company’s extraordinary 60% expansion in 2024 and 236% surge in 2023. This trajectory reflects how the company has scaled from $0.53 per share in 2022 to a projected $5.19 by next year.

Vertiv’s stock performance mirrors its operational momentum, advancing roughly 1,100% over the past three years—outpacing most of the so-called Mag 7 tech stocks and matching the performance of the semiconductor industry’s most prominent player. Even after a recent 16% decline from October highs, VRT has still gained approximately 45% this year.

Currently, the stock trades at a meaningful 25% discount to its peak valuations, with a forward price-to-earnings ratio around 32.9X. The recent pullback has cooled previously stretched technical indicators, making the risk-reward profile more attractive for investors considering entry points.

Taiwan Semiconductor Manufacturing: The Foundry Monopoly With Durable Advantages

Taiwan Semiconductor Manufacturing Co. (TSM) operates with near-monopolistic advantages in advanced chip production. Commanding 60% of the overall foundry market and 90% of cutting-edge semiconductor manufacturing, TSM remains the exclusive production partner for Nvidia, Apple, and virtually every major technology company pursuing artificial intelligence capabilities.

The company’s competitive moat stems from decades of engineering expertise and astronomical capital investments that competitors lack the motivation—and often the capital—to replicate. TSM’s 3-nanometer production capacity continues expanding as demand from the AI sector accelerates, creating a self-reinforcing cycle that strengthens its market position.

Taiwan Semi’s most recent quarter delivered the “beat and raise” performance that has become its trademark. Management’s projections call for 34% revenue growth in fiscal 2025, followed by 21% expansion in fiscal 2026, propelling annual revenue from $90 billion in 2024 to roughly $145 billion next year. Adjusted earnings per share growth accelerates even faster, with 45% expansion expected in FY25 and 20% growth thereafter.

What stands out to Wall Street analysts: the company has attracted ten “Strong Buy” ratings across thirteen brokerage recommendations. More tellingly, TSM’s earnings estimates have climbed 12% since mid-October, extending a pattern of upward revisions that reflects improving business momentum.

The stock’s ten-year performance tells the story of long-term dominance, with TSM returning approximately 1,110%—outpacing even the broader semiconductor sector’s 400% return over the same period. Though TSM has declined approximately 11% from recent peaks and trades roughly 18% below average analyst price targets, the valuation reset offers opportunity. At 23.9X forward earnings, Taiwan Semi trades at a 15% discount relative to the broader technology sector and sits 30% below prior valuation highs.

Market Timing Considerations: The Case for Starting Positions Now

The timing question haunts every investor watching this correction unfold. Waiting for Nvidia’s earnings or holding out for further weakness to the 200-day moving average represents a defensible strategy. However, perfect market timing consistently eludes even the most experienced money managers and well-resourced hedge funds.

The Fear and Greed Index—a contrarian gauge favored by institutional traders—currently registers at 11 out of 100, indicating “Extreme Fear” in market psychology. For context, this gauge read only 3 out of 100 when equity markets bottomed in early April. These readings suggest meaningful capitulation and potential exhaustion of selling pressure.

Meanwhile, the fundamental backdrop remains constructive. Earnings season progressed largely without major disappointments, as the largest technology companies reaffirmed strong business outlooks and maintained ambitious artificial intelligence spending commitments. Fed interest rate cuts remain probable, providing monetary support for equity valuations. Economists project earnings growth acceleration across virtually every economic sector in 2026 and 2027.

The Nasdaq has tested its 50-day moving average and recently approached levels not seen in several months. Both TSM and VRT similarly traded near key technical support levels, suggesting sellers may be exhausted at current prices.

The Path Forward for Investors

The pullback in artificial intelligence stocks and semiconductor shares reflects profit-taking ahead of transformative earnings announcements rather than fundamental deterioration in business conditions. For investors with multi-year time horizons, the combination of improved valuations, extreme fear readings, and strong forward guidance creates a compelling backdrop for gradually establishing positions in semiconductor leaders.

Whether initiating stakes immediately or waiting for additional weakness, the medium-term case for quality AI infrastructure companies remains intact.