Why Nvidia, Intel, Broadcom and other semiconductor stocks gathered on Wednesday morning

Investors and consumers are all growing tired of sustained inflation, and the economy is proud of the best minds on both Wall Street and Main Street. The latest reading on inflation was better than expected, so there was eventually some good news on that front. Adding fuel to enthusiasm was a groundbreaking collaboration potential among some of the most widely known names in the semiconductor space.

With that in mind, chip maker Nvidia (NVDA) -0.14%)) 6.7% jumped. Intel, Computer and Semiconductor Expert (INTC) 14.60%)) Rose 4.2%. Chip Foundry Taiwan Semiconductor Manufacturing (TSM) -3.15%))commonly referred to as TSMC, 3.7% jumped. and Semiconductor Giants Broadcom (avgo) -1.48%)) As of 12:35pm on Wednesday, we had 3.7%.

Image source: Getty Images.

Good news about inflation

The latest monthly inflation report from the U.S. Bureau of Labor Statistics showed that inflation has cooled somewhat last month and is a welcome development for struggling consumers. The Consumer Price Index (CPI), the most widely held measure of inflation, rose 2.8% in February compared to the same period last year. Prices also fell 0.2% a month.

Both numbers were better than expected as economists predicted inflation would increase by 2.9% year-on-year and 0.3% would increase steadily. “Core” data excluding volatile food and energy prices rose 3.1% compared to last year, sequentially rising 0.2%, lower than expected, at 3.2% and 0.3%, respectively.

The Federal Reserve continues to pursue its elusive 2% inflation target, but Wall Street has thanked the signs of improvement and sent some investors shopping.

A groundbreaking collaboration

There was also a significant development in the chip space that helped fuel the semiconductor rally.

Reports have been revealed that TSMC has come up with plans to join forces to place bets on the joint venture (JV) to operate a foundry belonging to Beleaguered Chipmaker Intel. TSMC runs a factory that is currently focused on custom semiconductors, but owns less than 50% of its JV.

The debate was reportedly sparked by a demand from President Donald Trump. President Donald Trump supported Intel’s efforts by recruiting TSMC. It has become clear that Intel or its casting business does not want to be fully acquired by foreign companies, as potential deals will require approval from the Trump administration. The talks are still in the early stages and continue, as TSMC is seeking additional chip makers to join the JV.

As evidenced by last year’s results, Intel has struggled for years. Revenue fell 2% in 2024, but the company lost $18.8 billion, marking its worst performance since 1986.

It also suggests that potential transactions face headwinds, as the processes used by Intel and TSMC are very different. There is also fear about protecting trade secrets by a variety of potential participants in collaboration.

Why is it important?

The struggle at Intel is well documented. Late last year, CEO Pat Gelsinger was kicked out at the helm of a troubling company less than four years later. Intel has struggled with years of market share losses and a disruptive strategy to profit from accelerated adoption of AI (AI), and investors have panicked at the lack of progress. TSMC is widely regarded as the world’s most advanced chip maker, and its expertise could be a catalyst that will trigger Intel’s transformation if enlisted.

Nvidia and Broadcom were one of the biggest beneficiaries of the AI ​​revolution, but face supply constraints as demand continues to outperform supply. The profits of the proposed JV are probably still years away, but investors were keen to aggressively develop and bid for stocks in chipmakers, even for the tech-centric Nasdaq composite. (^ixic -1.96%)) It remains in the correction area.

On the bright side, Broadcom, Nvidia and TSM have been priced more attractively after the recent market slump, with semiconductor experts selling 30x, 26x and 20x earnings respectively.