Chip stocks moved higher early Thursday after Taiwan Semiconductor Manufacturing Company (TSMC) issued financial forecasts indicating robust demand for artificial intelligence. TSMC's CEO, C.C. Wei, also addressed concerns about a potential bubble in AI-related stocks.
TSMC reported fourth-quarter results that exceeded Wall Street expectations. Executives stated the company expects AI-related revenue to grow at a compounded annual rate in the high-50% range through 2029. The company plans to increase capital expenditures to about $54 billion in 2026, up from approximately $41 billion in 2025. Wei described developments in the AI market as "very positive."
"We are preparing to increase our capacity and stepping [up] our capex investment to support our customers' future growth," Wei told analysts. "Our conviction in the multiyear AI megatrend remains strong, and we believe the demand for semiconductor[s] will continue to be very fundamental."
Following the announcement, Nvidia stock rose nearly 2% at the market open. Shares of AMD and Broadcom increased 3% and 2%, respectively. Micron and Arm shares advanced 3%. Stocks of Amazon, Meta, Microsoft, and Alphabet also saw slight gains. TSMC's own stock was up more than 4%.
When asked about an AI bubble, Wei said the question made him "very nervous." He noted he spent the past three to four months speaking with TSMC's customers and their end customers to assess AI demand. "They show[ed] me the evidence that AI really help[s] their business," Wei said. "AI is real — not only real, [but it] is starting to grow into our daily life."
TSMC provided a first-quarter sales outlook of $35.2 billion at the midpoint, above analyst projections of $33.2 billion. The company's results and guidance are seen as an indicator for upcoming earnings reports from major technology firms. TSMC's largest customers include Apple, Nvidia, Qualcomm, AMD, Broadcom, and Amazon. Nvidia accounts for 13% of TSMC's revenue.
In a note to clients Thursday, Wedbush analyst Matthew Bryson wrote that TSMC's results "necessarily imply strong continued orders" for chip designers like Nvidia and Broadcom.