Investors and consumers have all grown weary of persistent inflation, and the state of the economy has been top of mind on Wall Street and Main Street alike. There was finally some good news on that front, as the latest read on inflation was better than expected, igniting a broad-based market rally. Adding fuel to the enthusiasm was the potential for a groundbreaking collaboration among some of the most widely known names in the semiconductor space.
With that as a backdrop, chipmaker Nvidia(NASDAQ: NVDA) jumped 6.7%; computer and semiconductor specialist Intel(NASDAQ: INTC) rose 4.2%; chip foundry Taiwan Semiconductor Manufacturing(NYSE: TSM), commonly referred to as TSMC, jumped 3.7%; and semiconductor giant Broadcom(NASDAQ: AVGO) rallied 3.7%, as of 12:35 p.m. ET on Wednesday.
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Good news on inflation
The latest monthly report on inflation from the U.S. Bureau of Labor Statistics showed that inflation cooled somewhat last month, a welcome development for struggling consumers. The Consumer Price Index (CPI), the most widely followed gauge of inflation, rose 2.8% in February compared to the year-ago period. Prices also decreased by 0.2% month over month.
Both numbers came in better than expectations, as economists predicted inflation to increase 2.9% year over year and 0.3% sequentially. "Core" data, which excludes volatile food and energy prices, was up 3.1% compared to this time last year and climbed 0.2% sequentially, both lower than expectations of 3.2% and 0.3%, respectively.
The Federal Reserve Bank continues to chase its elusive inflation goal of 2%, but Wall Street was thankful for any signs of improvement, sending some investors on a buying spree.
A groundbreaking collaboration
There were also key developments in the chip space that helped fuel the semiconductor rally.
Reports emerged that TSMC had floated a plan that would see Nvidia, Broadcom, and Advanced Micro Devices join forces and take stakes in a joint venture (JV) to operate the foundry belonging to beleaguered chipmaker Intel. TSMC would run the factories, which are currently focused on custom semiconductors, but would own less than 50% of the JV.
The discussions were reportedly sparked by a request from President Donald Trump, who enlisted TSMC to help Intel in its turnaround efforts. Any potential deal would require the approval of the Trump administration, which has made it clear it doesn't want Intel or its foundry business to be fully acquired by a foreign company. Talks are still in the early stages and are continuing, as TSMC is seeking an additional chipmaker to join the JV, according to reports.
Intel has been struggling for years, as evidenced by last year's results. Revenue declined 2% in 2024, but the company lost $18.8 billion, marking its worst performance since 1986.
Reports also suggest that any potential deal would face headwinds, as the processes used by Intel and TSMC are very different. There are also fears regarding the protection of trade secrets by the various potential participants in the collaboration.
Why it matters
The struggles at Intel have been well-documented. Late last year, CEO Pat Gelsinger was forced out after less than four years at the helm of the beleaguered company. Intel has suffered years of market share losses and a muddled strategy to profit from the accelerating adoption of artificial intelligence (AI), and investors grew impatient with its lack of progress. TSMC is widely regarded as the world's most advanced chipmaker, and its expertise -- if enlisted -- could be the catalyst that sparks a turnaround for Intel.
For their part, Nvidia and Broadcom have been among the biggest beneficiaries of the AI revolution, but have faced supply constraints as demand continues to outstrip supply. While any benefit from the proposed JV would probably still be years away, investors were eager for any positive developments and bid up shares of the chipmakers, even as the tech-centric Nasdaq Composite(NASDAQINDEX: ^IXIC) remains mired in correction territory.
On the bright side, Broadcom, Nvidia, and TSM are now much more attractively priced after the recent market downturn, with the semiconductor specialists selling for 30 times, 26 times, and 20 times forward earnings, respectively.
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Danny Vena has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: short May 2025 $30 calls on Intel. The Motley Fool has a disclosure policy.
