Chipmakers are unable to keep up with rising demand for AI chipsets. Stas Knop/

Nvidia is one of the world's biggest companies, with a market capitalisation of $3.11 trillion. The Nvidia stock returned a phenomenal 282,884% in total returns since its 1999 IPO or 36.8% in average annual returns over the last 25 years.

The chipmaker's massive leap into powering AI engines and growing demand for graphics processing units (GPU) that power crypto mining rigs buoyed its stock price to record levels above $1,000 before the recent 10:1 stock split. Nvidia is trading at $122.81 on June 24.

Although the company's outlook remains bright, and investors may still witness strong returns from here, it will likely be less fast than the last few years. If you missed Nvidia's historic returns, several of its suppliers' shares look promising and showcased impressive stock price growth alongside Nvidia's meteoric rise.

Taiwan Semiconductor Manufacturing Company (TSMC)

Taiwan Semiconductor Manufacturing Company is the world's biggest semiconductor foundry. It manufactures high-end chips for tech companies, and due to the AI boom led by Nvidia, TSMC's ADR stock quote on the NYSE has jumped over 58% year-to-date (YTD) to trade at $170.48 on June 24.

The Taiwan-based firm is a major supplier of Nvidia's semiconductor products that power its GPUs. It also offers advanced packaging services like chip-on-wafer-on-substrated (CoWos) to the trillion-dollar firm. TSMC confirmed in March that it will construct two more fabrication labs in Chiayi, Taiwan, to expand its CoWos capacity and match the growing demand from Nvidia and other AI chip companies.

In the same month, Nvidia announced that TSMC will leverage its computational lithography platform to expedite the manufacturing of next-gen chips.

"Computational lithography is a cornerstone of chip manufacturing," said Nvidia CEO Jensen Huang. "Our work on cuLitho, in partnership with TSMC and Synopsys, applies accelerated computing and generative AI to open new frontiers for semiconductor scaling."

"Our work with NVIDIA to integrate GPU-accelerated computing in the TSMC workflow has resulted in great leaps in performance, dramatic throughput improvement, shortened cycle time and reduced power requirements," said TSMC CEO C.C. Wei.

In Q1, TSMC posted an 8.9% year-over-year (YoY) rise in net income to $7.17 billion on a 16.5% YoY revenue jump to $18.87 billion due to higher component demand for high-performance computing (HPC), smartphones, and IoT segments.

"Our business in the first quarter was impacted by smartphone seasonality, partially offset by continued HPC-related demand," said Wendell Huang, Senior VP and CFO of TSMC. "Moving into Q2 2024, we expect our business to be supported by strong demand for our industry-leading 3nm and 5nm technologies, partially offset by continued smartphone seasonality."

The company's profit margin was 38% last quarter. TSMC management also increased its revenue guidance for Q2 to between $19.6 billion and $20.4 billion on robust demand for its cutting-edge chips.


Optical networking gear specialist Fabrinet manufactures optical sensors, transmitters, receivers, and industrial lasers for diverse industries. The stock has jumped over 30% YTD to trade at over $243 on June 24.

Its Datacom division's production of fibre optic cables for data centres continues to drive revenues on sustained demand for high bit-rate products. Nvidia has partnered with Fabrinet for help with manufacturing their networking cables. Fabrinet manufactures very short-reach active optical cables with 800G transceivers for the GPU maker's data centre.

The 800G transceiver enables linking computers by high-capacity fibre optic cabling to achieve 800 gigabits per second data transfer speeds.

"The company [Fabrinet] is one of the earliest and most direct beneficiaries of the strong ramp of the AI 800G optical supply chain," Rosenblatt Securities analyst Mike Genovese had said in May. He also sees a rebound in Fabrinet's telecom and data communications businesses.

Nvidia and top computer makers on June 2 announced a series of Nvidia Blackwell architecture-powered systems to create AI factories and data centres to drive generative AI breakthroughs.

"The next industrial revolution has begun. Companies and countries are partnering with NVIDIA to shift the trillion-dollar traditional data centres to accelerated computing and build a new type of data centre — AI factories — to produce a new commodity: artificial intelligence," CEO Jenson Huang had said. "From server, networking and infrastructure manufacturers to software developers, the whole industry is gearing up for Blackwell to accelerate AI-powered innovation for every field."

Fabrinet's Datacom business dominated revenue share, generating $305.5 million for the quarter ended March 29. Fabrinet's GAAP revenue increased YoY to $731.5 million from $665.3 million. Meanwhile, net income grew YoY to $80.9 million from $59.4 million.

"We delivered strong results in the quarter, exceeding both our revenue and EPS guidance. Our results were driven by record datacom revenue from continued demand for high-data-rate products and sequential growth in telecom revenue, primarily from datacenter interconnect products," said Fabrinet CEO Seamus Grady." Looking to the fourth quarter, we anticipate continued strength in datacom and sequential growth in automotive."

However, the company's significant ties with Israel can become a potential source of concern amid rising geopolitical tensions. Fabrinet's Israel production facility specialises in advanced optical packaging, PCB assembly, and precision sensor manufacturing.

SK hynix

South Korea-based SK hynix is the second-largest memory chipmaker in the world and was Nvidia's sole supplier of high-bandwidth memory (HBM) chips until March. The stock, listed on the Korea Stock Exchange, has jumped over 55% YTD to trade around ₩223,000 ($160.70) as of June 24.

The company stated last month it had run out of HBM chips for AI chipsets for 2024 and was almost sold out for 2025 due to the rapid integration of AI services across industries.

The Nvidia supplier plans to ramp up mass production of its new-gen, 12-layer HBM3E chips in Q3. "As AI functions and performance are being upgraded faster than expected, customer demand for ultra-high-performance chips such as the 12-layer chips appear to be increasing faster than for 8-layer HBM3Es," said Jeff Kim, head of research at KB Securities.

As part of efforts to bump HBM production capacity, SK hynix has decided to construct a $3.87 billion chip packaging plan in Indiana, US. Simultaneously, the firm planned a $3.9 billion domestic DRAM chip factory to match surging demand.

Furthermore, the company's US business, SK hynix America, at the heart of Silicon Valley, reopened in May after months-long renovation. While the US division primarily focuses on sales and customer service, there's been an uptick in R&D activity in recent years. The American headquarters is the central communication channel between the company and its clients and strives to advance AI memory leadership in the US and beyond.

"The HBM market is expected to continue to grow as data, and (AI) model sizes increase," SK hynix CEO Kwak Noh-Jung said in a news conference. "Annual demand growth is expected to be about 60% in the mid-to long-term."

SK hynix posted an all-time high Q1 revenue of ₩12.43 trillion, a 144% YoY increase from ₩5.08 trillion. The company's operating profit increased by 734% to ₩2.88 trillion, which has led the company to state it has entered a rebound phase after an extended slump in the market.

The chipmaker also attributed the growth in operating profit to a hike in eSSD and AI server product sales driven by its leadership in AI memory technology, including HBMs. SK hynix anticipates steady memory market growth in the near term as demand for AI memory climbs and the DRAM market recovers.

SK hynix head of AI infrastructure, Justin Kim, said that by 2028, the portion of chips made for AI could account for 61% of all memory volume in value from nearly 5% last year.

Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.