The stock market is full of independent companies, but they are all intertwined. One may be a supplier, while another markets products. Another may be a designer, while another uses its products. As a result, investors can look for clues about one stock in other companies' earnings reports.
Recently, I saw one such huge connection in Taiwan Semiconductor Manufacturing's (NYSE: TSM) fourth-quarter earnings report. TSMC, as it's also known, is the world's primary foundry for producing logic chips and supplies them to nearly every company in cutting-edge tech. One of its biggest clients is Nvidia (NASDAQ: NVDA), and the news that TSMC just delivered is huge for that client.
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TSMC's dominance makes it easy to trace beneficiaries
The world of logic-chip foundries is fairly small. There is TSMC and some lesser competitors that don't have the same level of dominance, such as Samsung. TSMC is really the only name in town after Intel's fall from grace. So, when the leading chip producer says that something good (or bad) is happening with demand, it's pretty easy to trace its downstream effects.
During the company's fourth-quarter conference call, Chief Executive Officer C.C. Wei said that his company has increased its projection for artificial intelligence (AI) chips to a mid- to high-50% compound annual growth rate (CAGR) for the period between 2024 and 2029. That's monstrous growth, and bodes well for some other predictions that Nvidia has already given shareholders.
Nvidia told investors that it expects global data-center capital expenditures to reach $3 trillion to $4 trillion by 2030, up from $600 billion in 2025. That equates to a 42% CAGR over that time frame, which is slightly less than what TSMC expects.
These two projections aren't exactly the same, but they are close enough that I think investors can take TSMC's projection as a confirmation of Nvidia's. This could be huge for the latter company since it would make an enormous amount of revenue in 2030 if it comes true.
Nvidia could come close to $1 trillion in revenue if the projection pans out
Wall Street analysts expect $213 billion in revenue for Nvidia's fiscal 2026 (ending January 2026). Should the company's revenue check in at a 42% CAGR during the next four years through 2030, that would give it revenue of $866 billion. It would be quite the feat for the largest company in the world by market cap to quadruple revenue in four years, and would make it a no-brainer buy now if its projection pans out.
That would require Nvidia to maintain its market share, which won't be easy to do. However, I think it's certainly in a strong position to continue growing rapidly during the next four years, and investors who don't have exposure to Nvidia should think about changing that.
One apprehension many investors have is the fear of an AI bubble. If one forms, it would likely affect Nvidia's stock. Taiwan Semiconductor's CEO has the same concern. He mentioned that he is "very nervous" about AI demand.
However, he said his company did a lot of research and checked in with its biggest clients before making the decision to invest more than $50 billion in chip production capabilities. If it's wrong, Wei cautioned, TSMC is in trouble. However, he is very confident that the research is right, especially because he spent a significant amount of time in the past quarter ensuring demand is real.
I think this should ease some fears about an AI bubble, because companies are doing their due diligence to ensure that AI demand is something that's here to stay. If it is, stocks like Taiwan Semiconductor Manufacturing and Nvidia have plenty of room to soar. I think each is an excellent investment option in 2026, and if you don't own them already, now is the perfect time to load up.
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Keithen Drury has positions in Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
