The artificial intelligence (AI) trend is driving significant share price gains for chipmakers Nvidia (NVDA) and Taiwan Semiconductor Manufacturing Company (TSM). Over the past year, their stocks have risen by 204% and 121%, respectively, outperforming the PHLX Semiconductor Sector index’s 35% gain.
The massive demand for powerful AI-capable chips in data centers has been a key factor in this growth. Major cloud service companies and governments are deploying large quantities of these semiconductors, designed by Nvidia and manufactured by TSMC. Market research firm Gartner estimates that global public cloud spending will grow 21.5% in 2025.
Microsoft’s recent investment plans for AI data centers suggest an AI arms race is intensifying. The company aims to invest $80 billion in building out its AI capabilities, with a focus on training AI models and deploying cloud-based applications. This news points towards a solid year for Nvidia and TSMC.
Microsoft’s capital expenditures are expected to increase by over 43% in 2025, driven by its plan to build more AI data centers. Meta Platforms is also planning significant growth in capital outlays, with combined spending of major cloud computing players projected to reach $300 billion in 2025 from around $200 billion last year.
Nvidia and TSMC’s efforts to increase output are likely to drive stronger growth. Microsoft CEO Satya Nadella has stated that the tech giant isn’t constrained for AI chip supply anymore, thanks to increased production capacity at TSMC. Nvidia is producing more of its next-generation processors than expected, driven by its foundry partner’s significant increase in AI chip production capacity.
Analysts expect Nvidia’s earnings to increase by 50% in 2026, while TSMC’s earnings are projected to jump by 28% in 2025. The combination of increased capital spending and the focus on quickly adding capacity will likely set these companies up for another year of strong gains that may surpass Wall Street’s current expectations.
Source: https://www.fool.com/investing/2025/01/11/80-billion-reasons-why-these-2-top-artificial-inte