Chip Stocks Rally as TSMC's Strong AI Forecast Boosts Sector
Taiwan Semiconductor's blockbuster earnings and bullish outlook on AI demand sent shares of NVIDIA, AMD, and other chip-related companies higher.
A wave of optimism swept through the semiconductor industry on Thursday after Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest and most critical contract chipmaker, delivered stellar earnings and a bullish forecast fueled by the explosive growth in artificial intelligence.
The report immediately triggered a sector-wide rally, lifting major US-listed chip stocks and reinforcing investor conviction in the long-term AI growth narrative. Shares of Advanced Micro Devices (AMD) climbed 1.19%, while chip-equipment maker Applied Materials saw its stock jump 6.2% on the positive sentiment. The benchmark PHLX Semiconductor Index (SOX), which tracks the industry's biggest names, surged in response to the news.
TSMC, a key supplier for tech giants like Apple and NVIDIA, reported a remarkable fourth-quarter net profit of $16 billion, a 35% jump from the previous year, on revenues that rose 21% to over $33 billion. The figures handily beat analyst expectations and signaled robust, ongoing demand for the company’s most advanced processors.
More significant than the backward-looking results was the company’s forward guidance. TSMC projected that its full-year revenue for 2026 could grow by approximately 30%, a powerful indicator of the health of the entire technology supply chain. To meet the voracious demand, the company announced a massive capital expenditure plan for the year, budgeting between $52 billion and $56 billion to expand its capacity.
Company executives directly credited the AI boom for the exceptional performance. The race among global technology firms to develop and deploy generative AI applications has created unprecedented demand for the high-end, power-efficient chips that TSMC manufactures using its leading-edge 3-nanometer and 5-nanometer process technologies.
This outlook is a direct boon for companies like NVIDIA and AMD, which design the graphics processing units (GPUs) that are the workhorses of AI data centers. While NVIDIA's shares saw volatile trading, they rose in the pre-market session as investors digested the implications of their primary manufacturing partner signaling a clear runway for growth. The results confirm that the production capacity for their highly sought-after AI accelerators remains tight and in high demand.
The positive ripple effect extended to companies that supply the machinery for manufacturing chips. Shares in Dutch firm ASML, which produces unique extreme ultraviolet (EUV) lithography machines essential for advanced chipmaking, also climbed, with its market value surpassing $500 billion.
TSMC's position as a bellwether for the global electronics industry means its performance is closely watched for clues about future demand not just for AI, but also for smartphones, cars, and high-performance computing. The strong report provides a dose of confidence that, despite macroeconomic headwinds, the foundational demand for advanced computing power remains exceptionally strong, with artificial intelligence leading the charge into the new year.