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Nvidia CEO Jensen Huang delivers a keynote address during the Nvidia GTC Conference at the SAP Center in San Jose, California, on March 18, 2024.
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Nvidia shares rose about 3% during trading on Thursday, rebounding one day after the stock plunged 7% on geopolitical concerns sparked by comments from U.S. presidential candidate Donald Trump.
Nvidia’s rise came after TSMC said on Thursday that demand remains high and supply remains constrained for high-end AI chips, which TSMC manufactures for Nvidia.
“I also try to reach the supply and demand balance, but I cannot. Today, the demand is so high I had to work very hard to meet customer demand,” Wei told analysts.
“The supply continues to be pretty tight, all the way through 2025,” TSMC Chairman C.C. Wei said on Thursday. The manufacturer reported revenue and net income higher than analyst expectations on Thursday, and the stock fell less than 1%.
On Wednesday, the semiconductor sector had its worst day since 2020, with big drops from AMD, Arm, Broadcom and Qualcomm alongside Nvidia. Chip stocks sunk on geopolitics concerns highlighted by comments from U.S. presidential candidate Donald Trump that he was considering a change to U.S. policy to not protect Taiwan from a Chinese invasion without payment. A Chinese invasion would throw Nvidia’s chip supply into question.
“While there is rising concern over geopolitical tension given the upcoming US presidential election, TSMC mentioned that it would continue its overseas expansion to mitigate the risks,” Citi analyst Laura Chen wrote in a note on Thursday. TSMC is currently constructing a large chip factory in Arizona, partially funded by U.S. subsidies.
Other chipmakers still struggled. Arm was down 2%, AMD fell 2%, and Qualcomm was flat. Super Micro Computer, a key server assembler for Nvidia, fell 2%.
Intel rose over 1%, and Broadcom was up about 3% after a report that said it was in talks to produce AI chips for OpenAI.
Bloomberg reported on Wednesday that the Biden administration is considering further trade restrictions on shipping chip manufacturing equipment to China. ASML, a Dutch company which makes the machines that TSMC uses to make chips, was off 1% after it reported light sales guidance for the current quarter on Thursday.
UBS analysts wrote in a Thursday note that investors are taking gains from strong semiconductor performers and reallocating them into other shares, although forthcoming commentary later this year on how companies are making a return on investment on AI chips may spur the sector higher again. Nvidia stock is up more than 150% so far in 2024.
“Following sharp semiconductor sector outperformance in the first half, some investors have rebalanced AI-linked semiconductor exposure into large-cap platform and profitless tech companies,” UBS analysts wrote in the note.
