AI Chip Stocks Surge: Nvidia, TSMC, and Arm Holdings Lead the Rally

Artificial intelligence (AI) semiconductor stocks Nvidia (NASDAQ: NVDA), Taiwan Semiconductor Manufacturing (NYSE: TSM), and Arm Holdings (NASDAQ: ARM) rallied on Friday, up 4.5%, 3.5%, and 10.1%, respectively, in Friday trading. These companies are big beneficiaries of the AI buildout, but each had come under pressure through December as technology investors took profits after big two-year runs in these stocks. However, a bullish blog post from AI leader Microsoft this morning got these three stocks moving higher again.

Microsoft Vice President Brad Smith wrote bullishly on the prospects and importance of generative artificial intelligence in a blog post this morning. As part of the post, he also disclosed that Microsoft plans to spend a whopping $80 billion on AI data centers in the current fiscal year, which ends in June. This significant ramp-up in AI data center spending through June at least signals a steeper ramp-up in AI infrastructure investment, directly benefiting the AI chip manufacturers Nvidia, TSMC, and Arm.

Nvidia, as the dominant general-purpose AI chipmaker, will likely see a higher demand for its AI chips, such as the A100 and H100, which are used in data centers for AI workloads. This increased demand can be expected to drive Nvidia's revenue and earnings growth. TSMC, as the leading semiconductor foundry, will likely see a boost in orders from Nvidia and other AI chip manufacturers, driving TSMC's revenue and earnings growth. Arm, providing the low-power chip architecture used by many smartphone makers and increasingly adopted in low-power data center chips, may also see an increased demand for its chips, driving Arm's revenue and earnings growth.

In summary, Microsoft's increased investment in AI data centers directly impacts the demand for AI chips from Nvidia, TSMC, and Arm. This increased demand is likely to drive revenue and earnings growth for these companies in 2025.