Nvidia shares have gained just 5% in 2026. That's a stark contrast to the 1,100% surge since ChatGPT launched in November 2022, and it leaves the world's most valuable company ($5.1 trillion market cap) trading at a P/E ratio not seen in seven years. The big test arrives Wednesday, July 16, when Taiwan Semiconductor Manufacturing reports earnings.
TSMC is the primary chip fabricator for nearly every company in the AI build-out. Its quarterly readout functions as a proxy for the entire semiconductor supply chain, and the company offers unusual transparency by reporting monthly revenue instead of making investors wait for quarterly filings.
If management signals that chip demand is cooling, it could drag down Nvidia and its peers. Strong results with bullish forward guidance could provide the catalyst the stock badly needs. The business hasn't been the problem.
Last quarter, revenue rose 85% year over year, and analysts expect 96% growth next quarter. The stock's weakness stems from market anxiety about whether hyperscalers like Amazon, Microsoft, and Google will sustain their AI infrastructure spending. Nvidia now trades at 22.8 times forward earnings, barely above the S&P 500's 21.7 multiple and cheaper than TSMC at 27.5.
April revenue rose 17.5% and May climbed 30.1%, both in New Taiwan dollars. June figures won't arrive until after earnings, but the trajectory signals demand remains strong.
Wall Street expects TSMC to post 35% revenue growth for the second quarter, with guidance of 40% growth for the next quarter. Results that beat those targets could lift the foundry and pull Nvidia higher with it. The company is also expanding beyond GPUs into networking, CPU offerings, and optical interconnects through partnerships with Nokia, Marvell Technology, Coherent, and Lumentum.
If TSMC delivers on Wednesday, Nvidia at 22.8 times forward earnings with 85%+ revenue growth becomes a valuation mismatch that historically corrects itself. Each prior period of P/E compression was followed by a sustained re-rating once earnings confirmed the durability of growth.
If it warns of a slowdown, the questions about AI capex get louder. The July 16 report will determine whether Nvidia's multiple stays near its seven-year low or begins to re-rate.
