Why an NVIDIA Chip Could Supercharge TSMC's Next Rally

In 2025, the world’s leader in advanced chip fabrication, Taiwan Semiconductor Manufacturing (NYSE: TSM), had another standout year. Overall, shares delivered a total return of 55%.

This marked the third consecutive year that TSMC generated a return of 40% or more for investors. TSMC’s longer-term performance is just as impressive.

Over the past 10 calendar years, the stock has generated a return of 30% or more seven times. As of the Jan. 6 close, TSMC’s cumulative 10-year return sits north of 1,700%. That’s more than five times better than the S&P 500’s approximately 300% return during the same stretch.

Looking into 2026 and beyond, TSMC may be able to gain a new source of demand that could add a tailwind to shares. This potential comes courtesy of TSMC’s key customer, chip giant NVIDIA (NASDAQ: NVDA). Let’s break down the news surrounding NVIDIA’s H200 chips and what they could mean for TSMC. 

What Is the H200, and Why Does China Want It?

NVIDIA builds its H200 graphics processing unit (GPU) on its Hopper architecture. This chip is one generation behind the most advanced chips NVIDIA is currently selling, the B200, which uses the Blackwell architecture.

Despite their age, Chinese customers want H200 chips badly. According to Reuters, Chinese firms have placed orders for more than 2 million H200 chips in 2026. Meanwhile, NVIDIA only has around 700,000 available.

The reason why China wants these chips is abundantly clear: they are far more advanced than any merchant GPU the country has been legally able to get its hands on. Chinese firm Huawei currently designs most of the country’s advanced chips. According to the Council on Foreign Relations, Huawei will not be able to make a chip as advanced as the H200 for two years.

The U.S. government has banned the sale of NVIDIA’s advanced chips, including the H200, to Chinese customers for several years. The government did this to stifle China’s advancements in artificial intelligence (AI). However, President Trump recently announced a key policy shift. On Dec. 8, 2025, the President said that the government would allow NVIDIA to sell H200 chips to approved Chinese customers. Now, let's understand how TSMC fits in.

TSMC Stands to Benefit From Surging AI Chip Demand in China

Reuters says that NVIDIA is “scrambling” to meet Chinese H200 demand. It has reportedly contacted TSMC as it looks to ramp up production. This could create a substantial new revenue stream for TSMC. Reuters believes that NVIDIA will sell the H200 for $27,000 each. If NVIDIA sells 2 million chips, that would be around $54 billion in revenue going to the tech firm.

Still, NVIDIA has 700,000 chips in stock, so it would not need TSMC to make them all. Additionally, it is hard to say how much revenue TSMC would generate from H200’s, as the $54 billion figure applies to NVIDIA, not to it. Still, with TSMC generating $116 billion in revenue over the last 12 months, the benefit could certainly be meaningful.

It is important to note that NVIDIA has not gained full approval to sell the H200. The U.S. government needs to approve orders from specific customers for sales to advance. The company is also waiting on approvals from the Chinese government.

However, should they grant approval, TSMC could potentially reap the benefits for multiple years. The Council on Foreign Relations says China’s most advanced chip-making plants are far less advanced than TSMC’s. They also have “very limited” production capacity compared to TSMC. Notably, Huawei is not producing enough of its most advanced 910C chips to meet Chinese demand. China’s limited production capacity stems largely from U.S. export controls on advanced chip-making equipment.

Overall, buying from TSMC is likely the only way that China can obtain better chips. Even if their plants became more advanced, the U.S. government likely would never allow them to make NVIDIA chips. In this case, TSMC’s H200 production could continue to expand in 2027.

Chinese H200s Could Be TSMC’s Next Growth Driver

In summary, if NVIDIA gains official approval to sell the H200 to China, TSMC has the chance to see a significant increase in demand. This could help fuel a continued rally in TSMC’s share price. Still, trade policies can shift quickly.

If the U.S. government decides China’s AI capabilities are catching up to the U.S. too quickly, it could halt H200 sales in the future.

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