The good news for Nvidia was difficult (NVDA) 3.16%)) Recent investors are evident from a roughly 10% decline in the company’s stock price over the past three months.
Once a high-flying artificial intelligence (AI) chip stocks brought prominent growth and are being squeezed by multiple headwinds, despite the fact that they led beyond expectations when they released their latest quarter results last November . Many other than Nvidia’s management have fallen in demand for AI chips and concerns about slowing growth to strengthen competition to strengthen export restrictions on recent breakthroughs claimed by Chinese startup DeepSeek The factors behind the stocks have been reduced.
However, Taiwanese semiconductor manufacturers (TSM) -2.21%)) Sales data for January 2025 suggests that investor concerns about AI chip demand and Nvidia’s performance health may be exaggerated. Let’s see why it may be.
TSMC sales have skyrocketed in impressive numbers over the past three months
Nvidia is a fake chip maker. This means not owning a manufacturing plant, but simply designing a chip. The manufacturing is done by TSMC, one of the world’s leading semiconductor foundries that manufactures chips for Fabless Chipmakers and Consumer Electronics companies. Therefore, a 36% jump in TSMC’s revenues over the previous month shows that demand for Nvidia’s AI chips has not waned.
More importantly, TSMC reported revenue growth rates of 58% and 34% in the last two months of 2024. Nvidia’s fourth quarter in 2025 coincides with the last three months, so there’s a good chance that Wall Street’s expectations will exceed when the chipmaker releases. The results were later this month.
Of course, Nvidia is not the only customer that TSMC has. However, it is worth noting that NVIDIA was TSMC’s second largest customer in 2023, and is reportedly accounting for 11% of the latter’s revenue. Recent developments also indicate that NVIDIA’s TSMC’s share of revenue may have increased. For example, Apple, the TSMC’s biggest customer in 2023, noted that in the fourth quarter of 2024, iPhone shipments fell by 4% a year ago.
Therefore, TSMC likely has generated more chips to Nvidia in the last three months, which could lead to a stronger sales growth rate for the latter. Another thing worth noting here is that TSMC will increase its advanced packaging capacity by around 85% this year, increasing its monthly range from 65,000 to 75,000 wafers to meet the robust demand for AI chips .
Nvidia is expected to get 63% of this capacity increase. Rivals such as Broadcom and Advanced Micro devices are projected to be far apart from the second and third positions with a share of 13% and 8% respectively. All this indicates that Nvidia’s AI chip supply chain is likely to be stronger in 2025.
Major cloud computing providers such as Metaplat, Microsoft, Alphabet and Amazon are set to significantly increase their class this year, and Nvidia’s improved supply chain will meet more orders and maintain impressive growth It may help. These four tech giants are planning to increase their total capital costs by 46% in 2025 as they continue to spend more money building their AI infrastructure.
Preferred development refers to a better time for Nvidia strains
The above discussion reveals that Nvidia is on track to benefit from a favorable AI chip demand environment. At the same time, the focus is on strengthening its supply chain to meet more demand, and the recent significant increase in TSMC’s revenues further suggests that NVIDIA can maintain healthy growth this year.
Analysts expect 52% of Nvidia’s revenue to rise to nearly $160 billion in the new fiscal year (which is just beginning). However, don’t be surprised to see Nvidia surpass that mark, as the $102 billion incremental capital expenditure by major tech players in 2025 is higher than the approximately $83 billion incremental spending last year.
Nvidia is expected to manage 85% of the AI chip market this year, making it ideally positioned to corner the lion’s share of this increased capital expenditure. So, when it releases its fourth quarter results for 2025 on February 26th, it appears that the show will surpass stronger expectations from Nvidia will be on the cards.
Randi Zuckerberg, a former director of market development, Facebook spokeswoman and sister to Metaplatform CEO Mark Zuckerberg, is a member of Motley Fool’s board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of the board of directors of Motley Fool. The harsh Chauhan has no position in any of the stock mentioned. Motley Fool recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Taiwanese semiconductor manufacturing. Motley Fool recommends Broadcom and the following options are recommended: A $395 call at Microsoft for January 2026 and a $405 call at short term Microsoft for January 2026. Motley Fools have a disclosure policy.
