Why Taiwan Semiconductor Stock Was Climbing Today

Key Points

• Shares of the tech giant rose on news that Nvidia would begin selling H20 chips to China again.

• Nvidia is a major customer of TSMC, and the news could signal a broader thawing in U.S.-China relations.

• TSMC is set to report second-quarter earnings on Thursday.

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Shares of Taiwan Semiconductor Manufacturing (NYSE: TSM) were moving higher as the chip manufacturing giant seemed to benefit from a broader tailwind in the semiconductor industry after Nvidia said it regained approval to sell its H20 artificial intelligence (AI) chip in China. The H20 is a less powerful version of the AI chips it sells in the U.S. and to other allies.

Nvidia is one of Taiwan Semi's biggest customers, and the news set off a broad rally in the sector, with Advanced Micro Devices shares jumping as well.

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As of 10:44 a.m. ET, TSMC, as the company is also known, was up 3%.

Image source: Getty Images.

China is back open

In a blog post last night, Nvidia said that CEO Jensen Huang met with President Trump and other policymakers in Washington and received assurance that the company would be granted a license to sell the H20 again to China.

That is big news for both the semiconductor industry and U.S.-China relations. Nvidia stock plunged in April when it said it would take an estimated $5.5 billion write-down after it lost the license to sell H20s, dragging the rest of the chip sector down with it.

Nvidia is one of TSMC's biggest customers, and a bellwether for the industry, so the reopening of the Chinese market bodes well both for it and the leading chip manufacturer.

What's next for TSMC?

Taiwan Semi is set to report second-quarter earnings on Thursday, which could prove to be another leg up for the stock. The company has already reported monthly revenue, which was up about 38% in New Taiwanese Dollars in the second quarter, and analysts are expecting earnings per share to rise $1.48 to $2.28.

If the company can top that number, the stock, which is already hit an all-time high today, could make another move higher.

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Jeremy Bowman has positions in Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.