The artificial intelligence (AI) trend has given a big boost to stock prices Nvidia:(NASDAQ: NVDA) and: Taiwan Semiconductor Manufacturing(NYSE: TSM) during the past year. Shares of the two chipmakers rose 204% and 121%, respectively, over the period, crushing gains of 35%. PHLX semiconductor section the index.
Massive demand for powerful chips that can handle AI workloads in data centers has played a central role in the share price rally as major cloud service companies and governments deploy AI-powered chips designed by Nvidia and manufactured by Taiwan Semi. a large number of special semiconductors. Market research company Gartner estimates that global public cloud spending grew by 19.2% in 2024, and predicts that it will grow at a faster rate of 21.5% in 2025.
Evidence is already starting to emerge that cloud spending will grow stronger in 2025. In a blog post earlier this month, Microsoft(NASDAQ: MSFT) Vice chairman and president Brad Smith said the company is “on track to invest nearly $80 billion to build AI-powered data centers to train AI models and deploy AI and cloud-based applications around the world.”
This news points to a solid year for Nvidia and TSMC.
When Microsoft released results for the first quarter of fiscal 2025, which ended on September 30, the company revealed that it spent $14.9 billion on fixed assets and equipment high, averaging $22 billion, for the rest of the fiscal year.
In comparison, Microsoft’s total capital expenditures were $55.7 billion in 2024, so its capitalization is on track to increase by 43%. Demand for AI chips, which Nvidia designs and TSMC manufactures, should continue to grow in 2025.
Microsoft won’t be the only company significantly increasing its capital spending on AI infrastructure, however. Meta platformsFor example, it is expected to report total capital spending in the range of $38-40 billion in 2024, but it projects “significant” growth in 2025. Amazon:and: The alphabet According to estimates, it could reach $300 billion in 2025, up from around $200 billion in 2024. Morgan Stanley.
The addressable market for AI chips will expand significantly this year. More importantly, there is a good chance that both of these semiconductor giants will be able to meet the huge demand from major cloud providers. This is because Microsoft CEO Satya Nadella recently stated that the tech giant is no longer limited to the supply of AI chips.
It is not surprising. During Nvidia’s November earnings conference callCFO Colette Kress said the company is “on track to beat our previous Blackwell revenue estimate by several billion dollars as our supply visibility continues to increase.” This means Nvidia is making more of its next The reason Nvidia now has more visibility into its supply chain is that its foundry partner TSMC is significantly increasing its AI chip manufacturing capacity.
TSMC is expected to double its advanced chip packaging capacity to 75,000 wafers per month by 2025. Furthermore, Nvidia has been allocated 60% of the added capacity this year. to make the most of the impressive increase in capital expenditures by the major cloud providers discussed above.
Analysts expect Nvidia’s earnings to rise 50% in fiscal 2026 (which starts in February) to $4.43 per share, while TSMC’s earnings, on the other hand, are expected to grow 28% in 2025. to $9.06 per share However, the combination of increased capital spending on AI data centers by cloud service providers as well Nvidia and TSMC’s focus on quickly adding capacity to serve that high and growing demand should set them up for another year of terrific gains that could exceed Wall Street’s current expectations.
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Randi Zuckerberg, former director of market development and Facebook spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors.Susan Frey, CEO of Alphabet, is a member of The Motley Fool’s board of directors John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool’s board of directors. Strictly Chauhan has no positions in any of the listed stocks. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long Jan 2026 $395 calls on Microsoft and Jan 2026 short $405 calls on Microsoft The Spotted Fool has a disclosure policy.
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