Nvidia rebounds after TSMC says AI chip demand remains strong

“I also try to achieve the balance between supply and demand, but I can’t do it. Now the demand is so high that I had to work very hard to meet customer demand,” Wei told analysts.

“Supply remains quite tight through 2025,” TSMC Chairman CC Wei said Thursday. The maker reported revenue and net profit on Thursday that beat analysts’ expectations, and its stock fell less than 1%.

The semiconductor sector suffered its worst day since 2020 on Wednesday, with sharp declines in AMD, Arm, Broadcom and Qualcomm alongside Nvidia. Semiconductor stocks fell on geopolitical concerns highlighted by US presidential candidate Donald Trump’s comments that he was considering a change in US policy to not protect Taiwan from a Chinese invasion without payment. A Chinese invasion would put Nvidia’s chip supply in question.

“As geopolitical tensions rise ahead of the U.S. presidential election, TSMC has indicated it will continue its overseas expansion to mitigate risks,” Citi analyst Laura Chen wrote in a note Thursday. TSMC is currently building a large chip factory in Arizona, funded in part by U.S. subsidies.

Other chipmakers continued to suffer. Arm fell 2%, AMD fell 2% and Qualcomm was flat. Super Micro Computer, a key server assembler for Nvidia, fell 2%.

Intel rose more than 1% and Broadcom rose about 3% after a report that it was in talks to produce AI chips for OpenAI.

Bloomberg reported Wednesday that the Biden administration is considering new trade restrictions on the shipment of chipmaking equipment to China. ASML, a Dutch company that makes the machines TSMC uses to make chips, fell 1% after giving a moderate sales forecast for the current quarter on Thursday.

UBS analysts wrote in a note Thursday that investors are taking advantage of semiconductors’ strong performance and reallocating it to other stocks, though upcoming commentary later this year on how companies are realizing returns on AI chips could boost the sector again. Nvidia shares are up more than 150% so far in 2024.

“Following the semiconductor sector’s strong outperformance in the first half, some investors have rebalanced their exposure to AI-related semiconductors toward large-cap platforms and profitless technology companies,” UBS analysts wrote in the note.