Nvidia's Stock Rises as TSMC Sees AI Chip Market as Robust

Concerns about the state of the artificial intelligence (AI) chip market were effectively dispelled by Taiwan Semiconductor Manufacturing Co.'s (TSMC) latest financial results. This has positioned Nvidia Corp. and other AI chip companies to see significant gains.

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Nvidia's shares saw a boost of over 3% during Thursday's morning trading, climbing to $139.94. If this momentum holds through the close of the regular trading session, it could mark a new record high for the stock. Currently, Nvidia’s highest closing price stands at $138.07, a record achieved earlier in the week.

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Along with Nvidia, other companies in the AI sector are also experiencing stock rallies. Shares of Advanced Micro Devices Inc. (AMD) are up approximately 2%. Notably, AMD's stock has a higher short interest compared to Broadcom Inc. Broadcom’s shares increased by 2.9%, while Micron Technology Inc.'s stock rose 2.2%. In fact, all companies listed on the PHLX Semiconductor Index are trading in positive territory on the day, contributing to the broader surge across the semiconductor sector.

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In TSMC’s earnings call, Chief Executive C.C. Wei confirmed that demand for AI-related products remained robust during the second half of 2024. According to a transcript provided by AlphaSense, Wei highlighted that TSMC anticipates a tripling of revenue from AI server processors in 2024, which will comprise a mid-teens percentage of the company's overall revenue for the year. TSMC’s strong results provided a favorable outlook not just for its own performance, but for the entire AI chip market.

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According to Cantor Fitzgerald analyst C.J. Muse, TSMC’s report reinforces the view that AI growth continues to be strong, which should result in sustained outperformance for companies such as Nvidia, Broadcom, AMD, Micron, and Marvell Technology Inc. These companies are key players in the AI chip market, which continues to flourish despite concerns in other areas of the semiconductor industry.

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Earlier in the week, AI stocks took a hit following cautious remarks from ASML Holding N.V., another major player in the semiconductor market. ASML had warned of a slow recovery across the broader chip sector. While ASML pointed to AI as a notable area of strength, shares of Nvidia and other companies in the AI space still saw declines at that time. This was somewhat surprising, given Nvidia's strong performance in the AI data-center chip business, which makes the company less vulnerable to broader semiconductor trends.

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However, Thursday’s rally reflects a more rational market reaction. While ASML’s caution impacted AI stocks earlier, TSMC’s results have now provided a more optimistic view of the AI landscape. TSMC’s success underscores the continued strength of the AI chip market, which remains a key growth driver for companies like Nvidia. The rise in TSMC's profits, driven by AI demand, serves as a positive indicator that the AI chip market is far from slowing down.

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Moreover, TSMC’s results suggest that improvements are not limited to AI alone. According to Muse, sectors outside AI have also stabilized, with signs of recovery emerging. TSMC’s unique position as the exclusive provider of advanced logic chips helps insulate the company from broader market weaknesses. While other areas of the semiconductor industry have struggled, TSMC’s dominant role in cutting-edge chip manufacturing has allowed it to maintain its strength.

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Overall, the AI chip sector appears to be on a solid growth trajectory, with companies like Nvidia, AMD, Broadcom, and TSMC leading the charge. Investors are likely to remain bullish on AI stocks as long as demand for AI products, particularly in the data center space, continues to rise. Despite occasional market fluctuations, the fundamental drivers of AI growth remain intact, and recent earnings reports from key industry players have confirmed that the AI chip market still holds significant potential.

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In conclusion, TSMC’s earnings report has dispelled any concerns about a slowdown in the AI chip sector, providing a boost to major players like Nvidia and AMD. While other areas of the semiconductor industry may face challenges, the AI chip market remains a standout, driven by strong demand for data-center processors and other AI-related products. Investors can expect continued outperformance from AI chip companies as the sector continues to expand and evolve.

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