(Reuters) – U.S. chip stocks rose on Thursday after strong sales forecast from industry leader TSMC boosted investor optimism about demand for processors used in artificial intelligence applications.

Taiwan Semiconductor Manufacturing Co, the world’s largest contract chipmaker, raised its expectations for annual revenue growth and said AI chip sales would account for a mid-teens percentage of its full-year revenue.

U.S.-listed TSMC shares rose nearly 9%, pushing the company’s market capitalization above $1 trillion.

The forecast from the leading maker of advanced AI chips boosted investor confidence in the prospects of chipmakers, whose market values ​​have soared over the past two years due to a surge in chip spending from Big Tech.

TSMC customer and AI chip leader Nvidia and smaller rival AMD gained more than 2%. Broadcom, Qualcomm and Micron rose between 1.5% and 3%.

“Nvidia is one of TSMC’s main customers, so there is a direct reference to the American chip company in the Taiwanese company’s results,” said Dan Coatsworth, investment analyst at AJ Bell.

Shares of struggling chipmaker Intel also rose 1.3%. Intel has been expanding its chip manufacturing facilities to compete with TSMC in advanced contract manufacturing, a venture that analysts say will take years.

TSMC’s outlook also gave investors some respite after sharp forecast cuts from chipmaker giant ASML raised fears of a slower-than-expected recovery in demand for semiconductors not used in AI.

“Fortunately, everything is fine in the AI ​​space,” Coatsworth said. “TSMC said demand for both AI-related businesses and smartphones was strong, suggesting the chip sector is still buoyant.”

U.S.-listed shares of TSMC have risen more than 80% this year, while Nvidia has more than doubled, as investors poured billions of dollars into chip stocks amid booming pick-and-shovel trading on Wall Street have stuck.

(Reporting by Arsheeya Bajwa in Bengaluru; Additional reporting by Akash Sriram; Editing by Maju Samuel)