US chip stocks rally as TSMC's AI-powered vision impresses investors

Oct 17 (Reuters) – U.S. chip stocks rose on Thursday after industry bellwether TSMC's strong sales forecast boosted investor optimism about demand for processors used to power artificial intelligence applications.

Taiwan Semiconductor Manufacturing Company (2330.TW)A new tab opensThe world's largest contract chipmaker, raised its expectations for annual revenue growth and said sales from AI chips accounted for a mid-teens percentage of its full-year revenue.

US-listed TSMC shares rose nearly 9%, lifting the company's market capitalization above $1 trillion.

Forecasts by the leading producer of advanced AI chips have bolstered investor confidence in the outlook for chipmakers over the past two years as big tech's chip spending surges.

TSMC customer and AI chip frontrunner Nvidia (NVDA.O)A new tab opens and smaller rival AMD (AMD.O)A new tab opens Gained more than 2%. Broadcom (AVGO.O)A new tab opensQualcomm (QCOM.O)A new tab opens and Micron (MU.O)A new tab opens increased between 1.5% and 3%.

“Nvidia is one of TSMC's major customers, so the Taiwanese company's results have a direct lesson for the American chip firm,” said Dan Coatsworth, investment analyst at AJ Bell.

Struggling chipmaker Intel (INTC.O)A new tab opens Shares also rose 1.3%. Intel is expanding its chip-making facilities in an effort to challenge TSMC in advanced contract manufacturing — a venture analysts expect will take years.

TSMC's outlook also gave investors some respite after deep forecast cuts from chipmaking equipment giant ASML ( ASML.AS ).A new tab opens Not used in AI has given rise to fears of a slower than expected recovery in semiconductor demand

“Fortunately, all is well in AI land,” Coatsworth said. “TSMC said demand was strong for both AI-related businesses and smartphones, suggesting there is still momentum in the chip sector.”

TSMC's US-listed shares have surged more than 80% this year, while Nvidia has more than doubled, as investors pour billions of dollars into chip stocks amid Wall Street's booming pick-and-shovel trade.

Reporting by Arshea Bajwa in Bengaluru; Additional reporting by Akash Sriram; Edited by Maju Samuel

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