Why AI chip stocks Nvidia, Taiwan Semiconductor Manufacturing and Arm Holdings rallied today
Artificial Intelligence (AI) Semiconductor Stock. Nvidia (NASDAQ: NVDA), Taiwanese semiconductor manufacturing (NYSE: TSM)and Arm Holdings (NASDAQ: ARM) it gained on Friday, by 4.5%, 3.5%, and 10.1%, respectively, in Friday trading.
These three companies benefit greatly from the development of artificial intelligence. However, each also came under pressure during December as tech investors took profits after big two-year rallies in those stocks.
But an optimistic post on the AI leader’s blog Microsoft this morning these three shares rose again. Here’s what’s so positive about what Microsoft had to say and why it may have eased some recent market fears.
In a blog post this morning, Microsoft VP Brad Smith wrote astutely about the prospects and importance generative artificial intelligence. As part of the announcement, he also revealed that Microsoft plans to spend a whopping $80 billion on AI data centers in the current fiscal year, which ends in June.
That may have been a pleasant surprise for some. Microsoft has only reported one quarter of fiscal 2025 and has spent just $14.9 billion in capital expenditures so far. So the $80 billion figure provided by Smith signals a steeper rise in AI data center spending at least through June.
While the $80 billion figure may have been the attention-grabbing headline, the larger thesis of the lengthy blog post was just as optimistic in the long run. In the announcement, which was addressed to the incoming presidential administration, Smith called AI “the electricity of our age” and advocated for three things: increasing investment in AI, investing in skills programs so more Americans can work with AI, and finally, exporting American AI to allies around the world, so that others do not adopt competing AI solutions from China.
Needless to say, increased investment and use of artificial intelligence would benefit these three stocks. Nvidia is today the dominant manufacturer of general-purpose AI chips. TSMC is today the dominant player in the production of high-end chips, and apparently considers Nvidia one of its most important customers, if not its most important. And Arm provides a low-power chip architecture used by many smartphone makers, which is also increasingly being adopted in low-power data center chips such as Nvidia Grace CPUs and custom CPUs designed in-house by major cloud service providers.
While the 2024 AI trade had a great year, some of these stocks had disappointing Decembers. Some of the reasons for the decline were inflation fears, as well as concerns that the AI spending boom of the past two years may be coming to an end. In a December podcast, Microsoft CEO Satya Nadella noted that Microsoft it will no longer be “chip limited” in 2025as it was in 2024.
