TSMC is exploring a Texas semiconductor factory anchored by Elon Musk's Terafab project, a move that would extend the Taiwanese foundry's US footprint beyond Arizona and into a state where AI-driven demand is concentrating political and industrial gravity1. The exploration coincides with Nvidia hitting a fresh all-time high and approaching a $6 trillion market capitalization, even as the chipmaker trades at a steep discount to its own historical valuation2,3. ANALYSIS Together, the two developments trace a single throughline: insatiable AI compute demand is now dictating where advanced fabs get built, who anchors them, and how the resulting capacity gets priced by public markets.
Why it matters
The CHIPS Act was designed to pull leading-edge fabrication onto US soil. Arizona was the first major beneficiary; a Texas campus would open a second geographic corridor and introduce a new variable: a single private anchor client, Musk's Terafab, shaping site selection for the world's most important contract chipmaker. ◆ That dynamic differs from the Arizona model, where TSMC's fabs serve a broad customer base. A Texas facility organized around one mega-buyer could accelerate construction timelines but also concentrate supply-chain risk.
Nvidia's trajectory supplies the demand-side context. The company holds roughly 97% market share in server GPUs. Its revenue jumped 106% from a year earlier in its latest quarter, and management expects roughly 70% revenue growth in fiscal 2028. Nvidia has said demand is exceeding supply through 2028. ◆ Those figures explain why a foundry would entertain a single-anchor arrangement: the volume commitments implied by AI infrastructure buildouts are large enough to justify dedicated capacity.
The big picture
TSMC already has plans to expand in Arizona. Adding Texas would give the foundry two US states and, by extension, two sets of state-level incentive negotiations. The Terafab connection is notable because it links TSMC's expansion calculus directly to Musk's broader AI-infrastructure ambitions through SpaceX's home state.
On the demand side, Nvidia's newer computing platforms, including Blackwell and Vera Rubin, are expanding its capabilities beyond GPUs and further into the CPU market. Its proprietary software platform has become an industry standard. ANALYSIS Each new silicon generation requires cutting-edge process nodes that only TSMC can deliver at scale, tightening the feedback loop between Nvidia's product roadmap and TSMC's capacity planning.
Nvidia's stock, despite hitting a record high, trades at about 16.7 times forward earnings, well below its average valuation of roughly 35 times earnings over both the past five and ten years. The company has underperformed the Philadelphia Semiconductor Index by 55% year to date and 75% over the past year. On Sept. 28, Nvidia added $150 billion to its share repurchase authorization, bringing the remaining total to $235 billion, which it expects to execute through fiscal 2028. That increase is roughly 4% of Nvidia's market value and represents the largest buyback authorization increase in company history.
Between the lines
Nvidia has said demand is exceeding supply through 2028, and management expects roughly 70% revenue growth in fiscal 2028. ANALYSIS Nvidia's $235 billion buyback commitment through fiscal 2028 is a capital-return signal consistent with those growth expectations; the scale of the authorization implies management is planning for sustained free-cash-flow generation at current or higher levels.
Stephanie Link, Chief Investment Strategist at Hightower Advisors, whose division manages $8.5 billion in assets, described Nvidia as "a best-in-breed company on sale" and noted she started buying the stock in July around $200. ◆ The valuation compression she identifies, a dominant franchise trading at less than half its historical earnings multiple, reflects a market that has been pricing execution risk even as the underlying business accelerates.
TSMC's willingness to explore a Musk-anchored facility also carries a geopolitical subtext. Concentrating advanced fab capacity in multiple US states diversifies TSMC's own exposure to cross-strait risk, while giving Washington additional leverage to argue that onshoring is proceeding without further legislative action.
What's next
TSMC's Texas exploration remains at an early stage; no formal commitment has been reported. Nvidia's next earnings report will test whether the 70% fiscal 2028 revenue growth guidance holds. The $235 billion buyback authorization sets a concrete capital-return schedule through fiscal 2028 that investors and analysts will track quarter by quarter. If TSMC does formalize a Texas plan, the identity and terms of its anchor client arrangement with Terafab will become the clearest market signal yet of how AI demand is physically reshaping US semiconductor geography.