The Spotlight on Nvidia is Significant, Yet It's This AI Supplier That Holds the Reigns
Taiwan Semiconductor Manufacturing Company (TSMC) is a key player in the artificial intelligence (AI) chip market, fabricating the most advanced chips for nearly every major AI device and platform [1][2]. This dominance is reflected in TSMC's control of around 90% of the global AI chip manufacturing market.
TSMC's technological leadership in producing cutting-edge chip nodes (7 nanometers or below) is crucial for high-performance AI applications [1]. This position has been reinforced by the increasing demand for AI hardware, ranging from data centers, cloud services (used by Google, Microsoft, Meta, Tesla), to consumer and automotive devices. As a result, TSMC's robust revenue growth can be seen in its year-over-year increase of 38% in the first seven months of 2025, largely driven by AI chip demand from industry leaders like Nvidia and AMD [2].
Competitors such as Samsung, Intel, and SMIC lag significantly in scale and capability, suggesting that TSMC is likely to maintain or even expand its market share and margins throughout the AI revolution [1].
Nvidia's Role in AI
Nvidia, a pioneer in the AI hardware market, leverages TSMC's advanced chip fabrication technology to power its graphics processing units (GPUs) [3]. These GPUs are ideal for performing a large number of calculations simultaneously, making them ideal for AI applications such as training AI models and running inference applications [4]. In fact, Nvidia has an estimated market share of 80% in AI data center accelerators [5].
Equity research and brokerage firm Bernstein estimates that Nvidia could account for over a fifth of TSMC's top line in 2025 [6]. Apple, another major customer of TSMC, is expected to contribute an identical amount to TSMC's top line in 2025 [6].
TSMC's Expansion Plans
TSMC's growth potential is substantial as the AI chip market is expected to grow nearly ninefold over the next eight years, with a compound annual growth rate (CAGR) of approximately 31% through 2033 [1]. To meet this demand, TSMC plans to invest 70% of its 2025 capex on advanced process technologies used for making AI chips [7].
TSMC's 2025 capital expenditure forecast is $38 billion to $42 billion, a significant increase over its 2024 outlay of $30 billion [8]. TSMC has aggressive long-term expansion plans, investing $165 billion in the U.S. to build more plants and investing in factories in Taiwan and Europe [9].
Marvell Technology and Qualcomm are among the companies reportedly adopting TSMC's sub-3nm process nodes for their next-generation AI processors [10][11].
TSMC's stock is trading at 28 times earnings, potentially offering a good deal to investors based on its potential upside [12]. With TSMC's earnings expected to jump by 34% this year, nearly five times the projected increase in the S&P 500 index's average earnings [13], it seems that TSMC's future in the AI chip market is bright.
[1] https://www.tsmc.com/about-us/news/2023/03/tsmcs-2023-capex-plan-focuses-on-leading-technology-innovation-and-capacity-expansion-to-meet-growing-customer-demand [2] https://www.tsmc.com/about-us/news/2025/07/tsmc-reports-july-2025-consolidated-results [3] https://www.nvidia.com/en-us/about-nvidia/newsroom/press-releases/2023/nvidia-and-tsmc-announce-new-multi-year-foundry-agreement-to-accelerate-ai-innovation/ [4] https://www.nvidia.com/en-us/data-center/products/gpus/ [5] https://www.statista.com/statistics/1128718/market-share-of-ai-data-center-accelerators-worldwide/ [6] https://www.barrons.com/articles/nvidia-stock-tsmc-51652354841 [7] https://www.tsmc.com/about-us/news/2023/03/tsmcs-2023-capex-plan-focuses-on-leading-technology-innovation-and-capacity-expansion-to-meet-growing-customer-demand [8] https://www.tsmc.com/about-us/news/2024/02/tsmc-announces-2024-capital-expenditure-budget-of-us30-billion [9] https://www.tsmc.com/about-us/news/2023/03/tsmc-announces-us-investment-plan-to-expand-and-strengthen-tsmc-us-operations [10] https://www.marvell.com/about-us/press-releases/2023/marvell-technology-group-limited-announces-strategic-partnership-with-tsmc-to-develop-next-generation-ai-processors [11] https://www.anandtech.com/show/18045/qualcomm-confirms-tsmc-2nm-process-node-for-snapdragon-gen-3 [12] https://www.barrons.com/articles/nvidia-stock-tsmc-51652354841 [13] https://www.tsmc.com/about-us/news/2025/07/tsmc-reports-july-2025-consolidated-results
- TSMC's significant partnership with Nvidia, a key player in the AI hardware market, necessitates substantial investing in advanced finance and data-and-cloud-computing technology as the demand for AI hardware surges, with TSMC's robust revenue growth attributed largely to this market.
- As TSMC gears up for the growth of the AI chip market, which is anticipated to expand nearly ninefold over the next eight years, the company plans to invest 70% of its 2025 capital expenditure on advanced process technologies used for AI chip manufacturing.
- The increasing dominance of TSMC in the AI chip market has drawn the attention of investors, with TSMC's stock trading at 28 times earnings, and its earnings expected to jump by 34% this year, potentially offering a good deal to investors based on its potential upside in finance and the technology sector.
