Chip shares surge after Nvidia partner TSMC downplays bubble concerns: 'AI is genuine'

Chip Stocks Surge After TSMC's Upbeat AI Outlook

Semiconductor shares rallied in premarket trading on Thursday after Taiwan Semiconductor Manufacturing Company (TSMC), the primary chip supplier for Nvidia (), released an optimistic financial forecast, highlighting robust demand for artificial intelligence and downplaying concerns about an AI market bubble.

TSMC surpassed analyst expectations for both revenue and profit in the fourth quarter. Company leaders projected that their AI-related income will expand at a compound annual growth rate in the upper 50% range through 2029. To meet this anticipated demand, TSMC plans to significantly boost its capital spending, targeting $54 billion in 2026—an increase from approximately $41 billion in 2025. CEO C.C. Wei described the AI sector as experiencing "very positive" momentum.

“We are getting ready to expand our production capabilities and are increasing our capital investments to support our clients’ future needs,” TSMC CEO C.C. Wei told analysts after the earnings report.

He added, “We remain highly confident in the long-term AI trend and expect ongoing, fundamental demand for semiconductors.”

Market Reaction

• Nvidia’s stock climbed over 1% before the opening bell, nearly recovering from the previous session’s decline.
• Shares of AMD () and Broadcom () each advanced more than 2%.
• Micron (), a memory supplier for Nvidia’s AI systems, and chip designer Arm () both saw their stocks rise by about 3%.
• Tech giants Amazon (), Meta (), Microsoft (), and Alphabet (, ) posted modest gains as well.

TSMC’s own shares jumped more than 5% following the announcement.

AI Bubble Concerns Addressed

When questioned about the possibility of an AI-driven stock bubble, CEO Wei admitted the topic made him “very nervous.” He explained that he spent several months consulting with both chip designers and their end users to determine whether AI demand is genuine, amid ongoing debates on Wall Street about the long-term returns of massive technology investments.

“They provided evidence that AI is truly benefiting their businesses,” Wei said. “AI isn’t just real—it’s beginning to become an integral part of everyday life.”

Strong Guidance and Industry Implications

For the first quarter, TSMC expects sales to reach $35.2 billion at the midpoint, exceeding Bloomberg’s analyst consensus of $33.2 billion.

The company’s robust performance and forward-looking guidance offer insight into what investors might anticipate from upcoming earnings reports in the tech sector. TSMC’s largest clients include Apple (), Nvidia, Qualcomm (), AMD, Broadcom, and Amazon. According to Bloomberg, Nvidia alone represents 13% of TSMC’s revenue.

Analyst Perspective

Matthew Bryson, an analyst at Wedbush, noted in a client memo that TSMC’s results “strongly suggest ongoing robust orders” for chipmakers such as Nvidia and Broadcom.