Nvidia Shares Rebound Amid Geopolitical Concerns and Strong Demand for AI Chips

Nvidia's stock experienced a 3% increase on Thursday, recovering from a 7% drop the previous day due to geopolitical tensions following comments from U.S. presidential candidate Donald Trump. The rebound was bolstered by Taiwan Semiconductor Manufacturing Company (TSMC) reporting sustained high demand and constrained supply for high-end AI chips, which it manufactures for Nvidia. TSMC Chairman C.C. Wei noted that the supply chain remains tight through 2025, indicating robust market conditions for advanced semiconductor products. The semiconductor sector faced significant challenges on Wednesday, marking its worst day since 2020, with major companies like AMD, Arm, Broadcom, and Qualcomm also experiencing declines. Trump's remarks about potential changes in U.S. policy regarding Taiwan raised concerns about the stability of chip supplies in the event of a Chinese invasion. Despite these geopolitical worries, TSMC's stock has surged nearly 70% this year, reflecting the growing demand for AI applications. In its latest earnings report, TSMC exceeded revenue and profit expectations, with net income rising to NT$247.85 billion, a 36.3% increase year-over-year. The company anticipates continued strong performance in the third quarter, driven by smartphone and AI-related demand. Analysts predict TSMC will raise its 2024 revenue growth target, with expectations for its capital budget to remain between $30 billion and $32 billion. As the demand for generative AI continues to escalate, TSMC's advanced 3-nanometer process is expected to see its capacity more than double in 2024. This surge in demand is likely to further influence the semiconductor market, with analysts suggesting that companies may soon provide insights on their returns from AI chip investments, potentially revitalizing investor interest in the sector.