TSMC Just Gave Investors a Glimpse of What's Ahead for Nvidia in 2026

Nvidia (NASDAQ: NVDA) has been one of the most successful tech companies on the planet in recent years. This is because the company noticed the potential of artificial intelligence (AI) early on and decided to take action. Nvidia focused the design of its graphics processing units (GPUs) to serve the needs of AI customers, and this proved to be a game-changing move.

As a result, Nvidia's earnings have soared in the double and triple digits, and the stock has skyrocketed too. In spite of this excellent performance, though, investors have wondered how long this momentum may continue. Spending on AI has marched higher, and investors worry that any slowdown could deal a blow to Nvidia and others in the space.

But uncertainty may not last for very long: Just this week, Taiwan Semiconductor Manufacturing (NYSE: TSM) offered investors a glimpse of what's ahead for Nvidia in 2026.

Image source: Getty Images.

Nvidia's AI leadership

Before we dive in, let's take a quick look back at the Nvidia story in recent quarters. As mentioned, Nvidia has built a leadership position in GPUs for AI, as they fuel key processes such as the training and inference of models. The company has also built out an entire portfolio of complementary products and services, and this has helped it become the key player in this fast-growing industry.

In the most recent quarter, Nvidia reported a 62% increase in revenue to $57 billion and spoke of soaring demand for its latest system, Blackwell Ultra. The company also has maintained high profitability on sales, with gross margin regularly surpassing 70%.

Investors have cheered on this performance, piling into the stock and driving it to a 900% increase over the past three years.

But late last year, as valuations of AI stocks and stocks in general reached high levels, investors started to worry about the possibility of an AI bubble. This weighed on the market in the month of November, but since then, concerns have eased, and many AI stocks have rebounded.

Now, let's consider TSMC's relationship with Nvidia and what the company's message has to say about Nvidia's path in 2026. TSMC is a key part of the Nvidia story, and that's because the company manufactures Nvidia's chips. Nvidia designs them but relies on this major manufacturer to bring them from the drawing board to reality.

TSMC's role in the AI chip market

And TSMC doesn't work uniquely with Nvidia; the company also produces the chips of other market giants, such as Advanced Micro Devices and Broadcom, and is in contact with the cloud service providers that buy those chips. This means the company has a very clear picture of the general demand environment.

TSMC, reporting earnings for the fourth quarter of 2025 that beat analysts' estimates, said it's spoken to cloud service providers regarding demand for AI.

"I'm quite satisfied with their answer," said C.C. Wei, chief executive officer of TSMC, during the earnings call. "AI is real" and "starting to grow into our daily life. Our conviction in the multi-year AI megatrend remains strong."

TSMC's process of working closely with chip designers and their customers puts the company in a good position to predict what the demand picture may look like in quarters to come. And the company's message today is that the need for GPUs should remain strong well into the future -- and that suggests Nvidia, as the market leader, may benefit in 2026 (and likely well beyond).

It's important to keep in mind that Nvidia has pledged to update its chips on an annual basis, and the next update is set to happen later this year with the launch of the Rubin system. AI customers, eager to use the most powerful tools available, may rush to get in on that product -- as they rushed to get in on Blackwell and Blackwell Ultra over the past year or so.

All of this could supercharge Nvidia's revenue later in the year, and seeing that potential, growth investors may scoop up the stock ahead of time. So TSMC's message offers us reason to be optimistic about Nvidia in 2026.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.