Nvidia (NVDA.O) shares soared to a record high on Thursday, propelling a broader rally in U.S. chip stocks after Taiwan Semiconductor Manufacturing Co. (TSMC) issued an optimistic sales forecast that heightened investor confidence in demand for processors critical to artificial intelligence applications.
TSMC, the world’s largest contract chipmaker, raised its annual revenue growth expectations, noting that sales from AI chips are projected to constitute a mid-teen percentage of its total revenue for the year. Following this announcement, TSMC’s U.S.-listed shares surged over 11%, pushing its market capitalization above $1 trillion.
The forecast from TSMC, a key supplier for advanced AI chips, reassured investors regarding the growth trajectory for chipmakers, many of whose market values have soared in the past two years due to increased chip spending by major technology firms.
Nvidia, a prominent player in the AI chip market and a major TSMC customer, saw its stock rise nearly 4% to an all-time high of $140.89 before settling at a 2% increase in afternoon trading. Smaller competitor AMD (AMD.O) also gained nearly 1%, while Broadcom (AVGO.O), Qualcomm (QCOM.O), and Micron (MU.O) experienced gains between 1% and 3.6%.
Dan Coatsworth, an investment analyst at AJ Bell, noted, “Nvidia is one of TSMC’s major customers, so there is a direct read-across to the American chip firm in the Taiwanese company’s results.”
Shares of Intel (INTC.O), which has been struggling but is actively expanding its chip fabrication capabilities to compete with TSMC in advanced contract manufacturing, rose 1%. However, analysts predict that it may take years for Intel to catch up.
TSMC’s positive outlook provided relief to investors following recent downgrades from chipmaking equipment giant ASML (ASML.AS), which raised concerns about a slower-than-expected recovery in demand for semiconductors outside the AI sector. “Fortunately, everything is fine in AI land,” Coatsworth added. “TSMC said demand was strong for both AI-related business and from smartphones, implying that the chip sector still has momentum.”
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