Shares of artificial intelligence (AI) semiconductor stocks Nvidia (NVDA 0.48%), Taiwan Semiconductor Manufacturing (TSM +0.42%), and Arm Holdings (ARM +0.41%) rallied on Friday, up 4.5%, 3.5%, and 10.1%, respectively, in Friday trading.
These three companies are each big beneficiaries of the AI buildout. However, each had also come under pressure through December as technology investors have taken profits after big two-year runs in these stocks.
But a bullish blog post from AI leader Microsoft this morning got these three stocks moving higher again. Here's what was so positive about what Microsoft had to say, and why it may have tamped down some recent market fears.
NASDAQ: NVDA
Key Data Points
$80 billion for AI capital expenditures
In a blog post this morning, Microsoft Vice President Brad Smith wrote bullishly on the prospects and importance of generative artificial intelligence. As part of the post, he also disclosed that Microsoft plans to spend a whopping $80 billion on AI data centers in the current fiscal year, which ends in June.
That may have been a pleasant surprise to some. Microsoft has only reported one quarter of fiscal 2025, and only spent $14.9 billion in capital expenditures thus far. Therefore, the $80 billion figure given by Smith signals a steeper ramp-up in AI data center spending through June at least.
While the $80 billion figure may have been the headline that caught attention, the larger thesis of the long blog post was similarly bullish long-term. In the post, which was addressed to the incoming presidential administration, Smith called AI the "electricity of our age," and advocated for three things: increased investment in AI, investments in skilling programs so that more Americans can work with AI, and finally, exporting American AI to allies across the world, so that others don't adopt competing AI solutions from China.
Needless to say, increased investments in and usage of AI would benefit these three stocks. Nvidia is the dominant general-purpose AI chipmaker today. TSMC is similarly the dominant player in leading-edge chip production today, and obviously counts Nvidia as one of its most important customers, if not the most important. And Arm provides the low-power chip architecture used by many smartphone makers, which is also increasingly being adopted in low-power data center chips such as the Nvidia Grace CPU and the custom CPUs self-designed by large cloud providers.
Quelling fears, for now
While the AI trade had a terrific year in 2024, some of these stocks had a disappointing December. Some reasons for the downdraft were fears over inflation, as well as the concern that the booming AI spend of the last two years may be coming to an end. In a December podcast, Microsoft CEO Satya Nadella noted that Microsoft would no longer be "chip-constrained" in 2025, as it was in 2024.
That could have implied that either TSMC was ramping up the capacity to produce more Nvidia chips, or that demand for AI infrastructure was slowing down, or both. Of note, Microsoft is the biggest current buyer of Nvidia chips, so the statement kind of cast a shadow over Nvidia, especially after its monster gains up to that point.
That is perhaps why Smith's blog post this morning was so reassuring for Nvidia and the entire semiconductor ecosystem. The $80 billion figure seemed to indicate the lack of chip constraints mentioned by Nadella last month was due to increased supply, and not necessarily a problem with demand.
That's why not only Nvidia, but really the entire AI semiconductor ecosystem, got a big boost today.
