Taiwan Semiconductor CEO C.C. Wei Just Delivered Incredible News for Nvidia Stock Investors

The past few years have been a nonstop thrill ride for Nvidia (NASDAQ: NVDA) investors. The company's graphics processing units (GPUs) quickly became the gold standard and a driving force underpinning the artificial intelligence (AI) revolution. The unprecedented demand for these chips has driven an unparalleled surge in revenue and income -- not to mention the company's stock price -- catapulting Nvidia's market cap above $4 trillion, making it the first company to reach that milestone.

However, after several years of unrelenting gains, Nvidia investors have begun to wonder if demand has already peaked. Many are looking for signs that the expansion of AI will continue, fueling greater adoption of the technology in the coming months and years.

Taiwan Semiconductor Manufacturing Company (NYSE: TSM), also known as TSMC, just provided the clearest evidence yet that AI adoption continues to accelerate.

Image source: Nvidia.

Blockbuster results

For the third quarter, TSMC generated revenue of NT$989.9 billion (roughly $33.1 billion), which jumped 30% year over year (or 41% in U.S. dollars). This resulted in earnings per share (EPS) of NT$17.44 (or $2.92 per ADR), up 39%.

To give those numbers context, analysts' consensus estimates were calling for revenue of $32 billion and EPS of $1.95, so TSMC crushed Wall Street's expectations.

CFO Wendell Huang said cost improvements helped fuel the increase in profitability, but overall, the results were driven by "strong demand for our leading-edge process technologies" (read "AI") -- and a review of the results for its business segments supports that claim. The high-performance computing (HPC) segment, which includes chips used in AI, surged 57% year over year. The rebound in smartphone processors continued, as revenue for the segment jumped 30% .

Management also boosted TSMC's fourth-quarter outlook, and is now forecasting revenue of $32.8 billion at the midpoint of its guidance, an increase of 24% compared to the prior-year quarter. For context, analysts' consensus estimates were calling for Q4 revenue of $31.5 billion. This shows that, despite an already robust outlook, AI growth continues to outpace expectations.

Furthermore, on the earnings call, CEO C.C. Wei noted that TSMC continues to see "very strong signals" from their customers that demand for AI-centric chips will continue to accelerate.

The implications for Nvidia

Beyond the obvious positive implications for TSMC investors, the results provide insight into broader developments across the AI landscape. Investors have been concerned that the hype surrounding AI might be outpacing actual use.

Yet Nvidia CEO Jensen Huang said during the company's second-quarter earnings conference call that data center spending -- driven by the adoption of AI -- is expected to reach between $3 trillion and $4 trillion by 2030.

Furthermore, TSMC reported that the company continues to invest heavily in its leading-edge process technologies to meet ongoing demand for the advanced chips needed to power AI.

As its GPUs are the gold standard for AI processing, this will likely translate to additional growth for Nvidia. The company controls a dominant 92% of the data center GPU market, according to IoT Analytics.

While much of that market is currently limited to hyperscale users and cloud providers -- including Amazon Web Services (AWS), Microsoft Azure, Alphabet's Google Cloud, and Meta Platforms -- demand is beginning to move downstream, as additional enterprises adopt AI. Nvidia will continue to benefit as more companies seek to profit from the benefits of both AI training and inference.

Since the advent of AI in early 2023, Nvidia stock has soared more than 1,140% (as of this writing). However, the popular narrative has recently shifted, suggesting AI adoption is slowing, but those on the front lines continue to report strong demand. TSMC's results are clear evidence that AI adoption is continuing at a rapid clip.

Nvidia stock is currently selling for just 28 times next year's expected earnings, and while that's a premium, I'd argue it's an attractive price to pay for a company expected to grow revenue by 26% annually over the next five years.

Danny Vena has positions in Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.