Good news has been difficult to come by for Nvidia (NASDAQ: NVDA) investors lately, which is evident from the roughly 10% decline in the company’s stock price in the past three months.
The once high-flying artificial intelligence (AI) chip stock has been weighed down by multiple headwinds despite delivering outstanding growth and guiding above expectations when it released its latest quarterly results in November last year. From concerns about a slowdown in its growth on account of weakening AI chip demand to intensifying competition to export-related restrictions to the recent breakthrough claimed by Chinese start-up DeepSeek, a number of factors outside of Nvidia’s control have pulled the stock down.
However, Taiwan Semiconductor Manufacturing‘s (NYSE: TSM) sales data for January 2025 suggests that investors’ concerns about the health of AI chip demand and Nvidia’s performance may be overblown. Let’s see why that may be the case.
Nvidia is a fabless chipmaker, which means that it doesn’t own any fabrication plants and simply designs chips. The manufacturing is done by TSMC, the world’s leading semiconductor foundry that fabricates chips for fabless chipmakers and consumer electronics companies. That’s why the 36% year-over-year jump in TSMC’s revenue last month is an indicator that the demand for Nvidia’s AI chips hasn’t waned.
More importantly, TSMC reported revenue growth of 58% and 34% in the final two months of 2024. As Nvidia’s fiscal fourth quarter of 2025 coincides with these three months, there is a solid chance that the chipmaker could exceed Wall Street’s expectations when it releases its results later this month.
Of course, Nvidia is not the only customer that TSMC has. However, it is worth noting that Nvidia was reportedly TSMC’s second-largest customer in 2023, accounting for 11% of the latter’s revenue. Also, recent developments indicate that Nvidia’s share of TSMC’s revenue may have increased. For instance, Apple, which was TSMC’s biggest customer in 2023, noted a 4% year-over-year decline in iPhone shipments in the fourth quarter of 2024.
So, it is likely that TSMC may have produced more chips for Nvidia in the past three months, and that could translate into stronger sales growth for the latter. Another thing worth noting here is that TSMC is expected to increase its advanced packaging capacity this year by around 85% to a range of 65,000 to 75,000 wafers per month to meet the robust demand for AI chips.
