Prediction: Nvidia Stock Will Soar in the Second Half of 2025, Thanks to This Incredible News From Taiwan Semiconductor Manufacturing

Globe and Mail

20-07-2025

Key Points
Artificial intelligence (AI) has supercharged Nvidia's growth, but investors have been leery about the future of AI.
Taiwan Semiconductor just reported blockbuster results, confirming that the AI revolution is alive and well.
Nvidia has another catalyst that will likely boost its results in the second half.
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After a blistering run that spanned more than two years and stock price gains of over 1,000%, Nvidia (NASDAQ: NVDA) investors are taking a more measured approach. Concerns about the future growth prospects of artificial intelligence (AI), uncertainty about sales in China, and fears over the impact of tariffs have all weighed on the chipmaker in recent months. Perhaps the biggest question for investors is whether the AI revolution is sustainable.
Many experts believe the widespread adoption of AI is just getting started, but investors have been looking for additional evidence. Taiwan Semiconductor Manufacturing (NYSE: TSM), commonly referred to as TSMC, reported its second-quarter results Thursday morning, providing the clearest sign yet that AI still has room to run.
Foundry to the AI stars
TSMC is the world's largest chip foundry, controlling an estimated 60% of the contract semiconductor manufacturing market. Perhaps more importantly, it has an estimated 90% of the market for the most advanced chips, those used for high-performance computing and AI -- and Nvidia is one of its biggest customers. As such, TSMC has its finger on the pulse of AI demand, and its recent performance is directly tied to the accelerating adoption of the technology.
While TSMC investors had high hopes for the results, they got much more than they bargained for. In the second quarter, the company generated revenue of $30.1 billion, up 39% year over year and 11% quarter over quarter. This resulted in adjusted earnings per share (EPS) that surged 61% to a record high $2.47 (per American depositary receipt unit).
To put the results into context with expectations, analysts' consensus estimates were calling for revenue of $30.2 billion and EPS of $2.38. The results were driven higher by TSMC's high-performance computing (HPC) division due to strong demand for AI. The company noted that its most advanced chips -- 7 nanometer and smaller -- represented 74% of total wafer sales during the quarter.
If that weren't enough to get investors excited, TSMC raised its 2025 forecast and now expects full-year revenue to climb 30% in U.S. dollars.
CEO C.C. Wei left no doubt about what drove the blockbuster results, which he said were "mainly due to continued robust AI and HPC-related demand." He went on to say that "recent developments are also positive to AI's long-term demand outlook." He pointed to increasing AI model usage and adoption, saying the company sees "AI demand continuing to be strong."
What this means for Nvidia
There's no denying that Nvidia has been one of the primary beneficiaries of the broad adoption of AI. In the past, the company was primarily known as a gaming company, supplying the graphics processing units (GPUs) that create lifelike images in video games -- but those days are long gone.
In Nvidia's fiscal 2026 first quarter, revenue of $44 billion jumped 69% year over year, but drilling down into the results tells a story. Data center revenue, including AI chips, soared 69% to a record $39 billion. At the same time, gaming and PC revenue jumped 42% to $3.8 billion. Put another way, Nvidia's data center sales accounted for 89% of the company's considerable revenue. That's why investors are watching so closely for any sign of weakening demand for AI, as it's so central to Nvidia's success over the past few years.
Looking ahead, Nvidia is guiding for second-quarter revenue of roughly $45 billion, which would represent year-over-year growth of 50%.
It's worth noting that Nvidia incurred a $4.5 billion charge in the first quarter, the result of export controls on its H20 chips destined for China. Just this week, CEO Jensen Huang revealed in a blog post that Nvidia has applied for a license to resume sales of these chips and had received assurances from the Trump administration that its application will be approved. Analysts estimate that the additional sales could be worth as much as $15 billion in the second half of the year.
The available evidence suggests the AI revolution is alive and well. That, combined with the resumption of chip sales to China, suggests Nvidia has a long runway for growth ahead. And since it's selling for just 29 times next year's expected earnings, it's still attractively priced.
And that's why I predict Nvidia stock will likely soar for the rest of 2025.
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