Why Now is the Optimal Time to Invest in Semiconductor Stocks Amid Tariff Relief and AI Infrastructure Boom

The semiconductor sector is poised for a renaissance as geopolitical tensions ease and artificial intelligence (AI) infrastructure spending surges. A temporary U.S.-China tariff truce, combined with a $315 billion+ AI investment boom in 2025, has created a rare convergence of valuation opportunities, supply-demand tailwinds, and geopolitical risk mitigation. For investors, this is a critical moment to deploy capital in chipmakers like NVIDIA (NVDA), Broadcom (AVGO), and Taiwan Semiconductor Manufacturing Company (TSM), which are positioned to capitalize on this inflection point.

Geopolitical Risk Mitigation: The Tariff Truce as a Game-Changer

The May 2025 U.S.-China agreement to slash tariffs to 30% and 10% respectively—down from 145% and 125%—has removed a major overhang on semiconductor supply chains.

. For AI chipmakers like NVIDIA and Broadcom, the truce reduces cost pressures:

• Lower Input Costs: Tariffs on components like memory chips and fabrication equipment have been halved, improving gross margins for firms reliant on cross-border supply chains.
• Stabilized Supply Chains: The 90-day truce, though temporary, provides a window to rebuild inventories and plan for long-term collaborations. For instance, TSMC’s joint venture with Intel to build a U.S. chip plant—accelerated by the truce—ensures a reliable supply of advanced nodes critical for AI processing.

While tariffs on strategic sectors like rare earth minerals and fentanyl precursors remain, the semiconductor exemption signals a strategic detente. The White House’s focus on “constructive dialogue” and Beijing’s “fight to the end” rhetoric now apply to broader issues, leaving chipmakers as collateral damage less frequently.

Valuation Opportunities: Discounted Growth at 20x Earnings

Semiconductor stocks remain undervalued relative to their growth potential. Take TSMC, the world’s largest contract chipmaker:

At 20x forward earnings, TSMC trades at a 25% discount to its five-year average. This discount ignores its dominance in 3nm and 2nm chip production—a capability unmatched by peers like GlobalFoundries or Intel. Meanwhile, NVIDIA’s stock, though up 7.5% premarket on the tariff news, remains below its 2024 high despite commanding a 90% share of AI training chip sales.

The market’s skepticism stems from lingering trade war fears, but the truce’s 90-day “reset” is a catalyst for revaluation. Analysts at JPMorgan estimate a 20% upside for TSMC if the truce extends beyond 2025, while NVIDIA’s AI data center business—projected to grow at 40% annually—is underappreciated in current valuations.

Supply-Demand Dynamics: AI’s $315B Capital Expenditure Surge

The AI infrastructure boom is no longer theoretical. In 2025 alone, global spending on AI chips, data centers, and cloud infrastructure will hit $315 billion, up from $180 billion in 2023. This surge is fueling demand for:

• High-Performance GPUs: NVIDIA’s H100 and H800 chips dominate AI training, with demand outpacing supply despite price hikes.
• Advanced Logic Nodes: TSMC’s 3nm process is now used in 80% of AI chip designs, with Apple, Qualcomm, and AMD all ramping production.
• Networking Chips: Broadcom’s dominance in data center switches and AI interconnects positions it to capture 40% of the $60 billion AI infrastructure spend in 2025.

The demand-supply imbalance is acute. TSMC’s 3nm capacity is fully booked through 2026, and Intel’s AI-focused “Lakefield” chips are delayed until 2026, leaving NVIDIA and AMD as the only scalable options. This creates a multi-year pricing power tailwind for AI chip leaders.

Risks and the Case for Immediate Action

No investment is without risk. The truce’s 90-day expiration looms, and China’s rare earth export controls or U.S. “national security” tariffs could resurface. However, three factors mitigate these risks:

1. Strategic Collaboration: TSMC’s U.S. and Japan fabs, paired with Intel’s foundry services, are diversifying supply chains, reducing reliance on any single trade partner.
2. AI’s Inelastic Demand: Companies like Meta and Amazon are doubling AI capex in 2025, even amid cost pressures—this is not a cyclical boom but a structural shift.
3. Valuation Safety Nets: At current prices, TSM and NVDA offer 10–15% downside protection against a worst-case trade escalation scenario.

Conclusion: Deploy Capital Now—Before the Rally Resumes

The semiconductor sector is at a pivotal crossroads. The tariff truce has removed the immediate threat of a 145% tariff burden, AI spending is exploding, and valuations remain discounted. For investors seeking asymmetric upside, this is the moment to act:

• Buy TSMC (TSM) at 20x forward earnings—a margin of safety against geopolitical risks.
• Overweight NVIDIA (NVDA) for its AI monopoly and 40% revenue growth trajectory.
• Consider Broadcom (AVGO) for its data center exposure and 30% dividend yield.

The next 12 months will test the truce’s durability, but the structural AI demand story is unshakable. With 90 days to prove the sector’s resilience, now is the time to position for what could be the next leg of the tech boom.

Investor takeaway: Semiconductor stocks offer a rare blend of discounted valuations, structural AI tailwinds, and reduced geopolitical risk. Act now before the rally resumes.