Are NVIDIA, TSMC, and Costco Worth Your Investment in 2025?

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Are NVIDIA, TSMC, and Costco Worth Your Investment in 2025?

As of June 3, 2025, the tech and retail sectors are buzzing with opportunities, particularly in AI and consumer staples. This blog dives into an investment analysis of three powerhouse companies—NVIDIA (NVDA), Taiwan Semiconductor Manufacturing Company (TSM), and Costco Wholesale Corporation (COST). Using a value-oriented lens inspired by Warren Buffett, we’ll explore their financial performance, business strengths, growth prospects, and whether their current stock prices (NVDA: $137.07, TSM: $193.85, COST: $1,056.25) make them compelling buys. Let’s break it down.

NVIDIA: Riding the AI Wave

Financial Snapshot (2015–2024)

NVIDIA has transformed from a gaming chip maker to an AI juggernaut. Its financials tell a story of explosive growth:

  • Revenue: From $4.85 billion in 2015 to $60.92 billion in 2024 (CAGR: 28.5%). For fiscal 2025, revenue hit $130.50 billion, up 114% year-over-year.

  • Net Income: From $1.02 billion to $29.76 billion (CAGR: 42.5%), with 2025 soaring to $72.88 billion.

  • EPS: Jumped from $0.05 to $1.19, reflecting strong profitability.

The driver? Demand for NVIDIA’s GPUs in AI, data centers, and gaming.

Business Strengths

NVIDIA’s dominance stems from:

  • AI Leadership: Its CUDA and Tensor Core GPUs are the gold standard for AI training and inference.

  • Gaming Powerhouse: The GeForce brand rules the gaming market.

  • Ecosystem: Software like CUDA and Omniverse locks in customers.

Risks: Competition from AMD and Intel, plus reliance on the AI boom, could pose challenges.

Valuation

At $137.07, NVIDIA’s P/E ratio is 45.9 (2025 EPS: $2.99), below its historical average of 52.15. The forward P/E is 35.7, with a PEG ratio of 1.19, suggesting fair value for its 30% expected growth. Analysts’ price targets average $161, hinting at upside.

Buy or Wait?

NVIDIA’s valuation is attractive compared to its history, and its AI-driven growth makes it a strong pick for growth investors. A reasonable buy price, based on historical P/E, is around $155.75, but the current $137.07 signals a potential bargain.

TSMC: The Semiconductor Backbone

Financial Snapshot (2015–2024)

TSMC, the world’s放下, has shown steady growth:

  • Revenue: From $23.99 billion to $88.27 billion (CAGR: 14.5%).

  • Net Income: From $8.33 billion to $35.33 billion (CAGR: 16.5%).

  • EPS: From $1.60 to $6.81.

Despite a 2023 dip due to industry corrections, TSMC remains a semiconductor titan.

Business Strengths

TSMC’s edge includes:

  • Tech Leadership: Pioneering 3nm and 2nm chips for clients like Apple and NVIDIA.

  • Diverse Clients: Reduces reliance on any single customer.

  • Global Reach: New fabs in the U.S., Japan, and Europe hedge geopolitical risks.

Risks: Geopolitical tensions and competition from Samsung and Intel are concerns.

Valuation

At $193.85, TSMC’s P/E is 28.48 (2024 EPS: $6.81), above its historical average of 19.15. The forward P/E is 20.78, with a PEG ratio of 1.39 and a 1.07% dividend yield. Analysts’ price target of $220 suggests modest upside.

Buy or Wait?

TSMC’s premium valuation (P/E above historical norms) suggests caution. A reasonable buy price, based on historical P/E, is around $130.35—well below the current price. Conservative investors may prefer waiting for a dip.

Costco: The Retail Giant

Financial Snapshot (2015–2024)

Costco’s steady growth shines:

  • Revenue: From $116.2 billion to $254.5 billion (CAGR: 9.1%).

  • Net Income: From $2.38 billion to $7.37 billion (CAGR: 13.4%).

  • EPS: From $5.37 to $16.56.

In 2024, operating cash flow hit $19.6 billion, showcasing robust cash generation.

Business Strengths

Costco’s model is a fortress:

  • Membership Fees: ~93% renewal rates ensure stable revenue.

  • Low Prices, High Turnover: Limited SKUs (~4,000) drive efficiency.

  • Private Label: Kirkland Signature boosts margins.

  • Global and E-commerce Growth: Online sales grew 16.1% in 2024.

Risks: Economic downturns, competition from Walmart and Amazon, and high valuation are concerns.

Valuation

At $1,056.25, Costco’s P/E is 61.55 (2024 EPS: $17.17), 69% above its historical average of 36.49. The forward P/E is 52.36, with a PEG ratio of 5.62 and a 0.45% dividend yield. Analysts’ price target of $1,067.91 suggests slight upside.

Buy or Wait?

Costco’s premium valuation (P/E far above historical norms) makes it less appealing for value investors. A reasonable buy price, based on historical P/E, is $626–$661, far below the current price. Consider dollar-cost averaging or waiting for a pullback to $700–$800.

Warren Buffett’s Take

Buffett’s philosophy favors strong moats at fair prices:

  • NVIDIA: Likely too volatile for Buffett, but its current P/E below historical norms might intrigue value investors.

  • TSMC: Buffett sold his stake in 2023 due to geopolitical risks, despite its stability and dividends.

  • Costco: Buffett sold in 2020 at a P/E of ~33, suggesting he’d avoid the current P/E of 61. However, Charlie Munger’s fondness for Costco highlights its quality.

Investment Recommendation

  • NVIDIA ($137.07): A compelling buy due to its reasonable valuation and AI-driven growth. Consider allocating a portion of your portfolio for growth exposure.

  • TSMC ($193.85): Strong fundamentals but overvalued. Wait for a price closer to $130 for a better margin of safety.

  • Costco ($1,056.25): A premium stock with stellar fundamentals. Use dollar-cost averaging or wait for a dip to $700–$800.

Portfolio Strategy: Avoid putting half your portfolio in one stock. Split investments across NVDA and TSM for tech exposure, or add Costco for stability, ensuring diversification. NVDA stands out as the best value today, but all three require careful timing due to market dynamics.

Sources: Financial data and analyst insights from MacroTrends, Yahoo Finance, Morningstar, CNN Markets, and TipRanks.

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