Dutch agency ASML and Taiwan’s TSMC, two of the world’s most necessary semiconductor firms, obtained a share price enhance on Thursday after Nvidia’s earnings impressed traders.

Nvidia reported earnings and income that beat market expectations on Wednesday. But its gross sales forecast of about $11 billion for the second quarter — greater than 50% greater than Wall Street estimates — was what despatched the U.S. large’s inventory surging greater than 24% in after-hours commerce.

The forecast comes as demand for its synthetic intelligence-related chips surges.

Nvidia designs and sells graphics processing unit (GPU) chips which can be utilized in knowledge facilities and go on to energy AI functions. Interest in AI has surged over latest months, arguably off the again of the viral nature of OpenAI’s ChatGPT.

The rise in Nvidia’s inventory has sparked a rally in chip names globally.

Two of the most notable are ASML and TSMC. ASML, headquartered in the Netherlands, was up greater than 5% in early European commerce Thursday. TSMC, which is listed in Taiwan, closed greater than 3% greater.

This rally could be defined by a easy truth: Nvidia doesn’t manufacture its personal chips. Instead, it depends on TSMC, the most superior chipmaker in the world, to fabricate its GPUs. And TSMC depends on machines from ASML, that are required to fabricate the world’s most superior semiconductors.

Nvidia’s bullish forecast for the second quarter has bolstered expectations that it’s going to ramp up orders with the likes of TSMC, which in flip depends on ASML’s tools.

“We have procured considerably greater provide for the second half of the yr,” Colette Kress, chief monetary officer at Nvidia, stated on the earnings name on Wednesday.

The inventory price rally throughout the trade highlights the concentrated nature of the semiconductor provide chain.

Nvidia is arguably the chief in terms of designing AI chips, nevertheless it depends on TSMC — the largest and most-advanced contract chipmaker in the world. TSMC manufactures chips for a plethora of firms together with Apple, for instance.

Meanwhile, ASML is the solely firm in the world that may makes and promote its $200 million extreme ultraviolet (EUV) lithography machine. This instrument is required to make cutting-edge chips, the likes of that are required by Nvidia for its top-end GPUs.