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Nvidia shares rose approximately 3% during trading on Thursday, rebounding from a 7% plunge the previous day triggered by geopolitical concerns stemming from comments made by U.S. presidential candidate Donald Trump. The rebound came after TSMC, a major manufacturer of chips for Nvidia, reported strong demand and constrained supply for high-end AI chips.
TSMC Chairman C.C. Wei stated that the company is working hard to meet the exceptionally high customer demand, but supply is expected to remain tight through 2025. The chipmaker reported revenue and net income that exceeded analyst expectations on Thursday.
The semiconductor sector experienced its worst day since 2020 on Wednesday, with significant drops in stocks of companies like AMD, Arm, Broadcom, and Qualcomm, alongside Nvidia. Chip stocks plunged due to geopolitical concerns highlighted by Trump’s comments suggesting a potential change in U.S. policy regarding Taiwan’s defense against a possible Chinese invasion.
Despite these concerns, TSMC mentioned that it would continue its overseas expansion plans to mitigate risks, including the construction of a large chip factory in Arizona, partially funded by U.S. subsidies.
While some chipmakers still struggled, Intel rose over 1%, and Broadcom gained approximately 3% after a report indicated it was in talks to produce AI chips for OpenAI. However, ASML, a Dutch company that manufactures the machines used by TSMC to make chips, fell 1% after reporting light sales guidance for the current quarter.
UBS analysts suggest that investors are taking gains from strong semiconductor performers and reallocating them into other shares, although upcoming commentary on the return on investment for AI chips may drive the sector higher again. Nvidia’s stock has already surged more than 150% so far in 2024.