AI Stocks Eye Recovery Amid Trade Talks

AI stocks, particularly TSMC and SoundHound AI, may rally as trade discussions unfold. TSMC anticipates strong revenue growth fueled by AI chip demand, while SoundHound eyes recovery after a steep decline.

Date: 07-05-2025

AI Rating: 8

Investors have been cautious regarding artificial intelligence (AI) stocks in 2025, largely due to heightened economic uncertainties and a trade war impacting the global market. However, recent signs of flexibility from the Trump administration regarding tariffs, along with a willingness to negotiate with affected countries, could provide a pathway for recovery in these stock prices. This backdrop sets the stage for potentially favorable dynamics in the second half of the year.In particular, **Taiwan Semiconductor Manufacturing (TSMC)** has shown signs of positive earnings momentum. TSMC reported a significant increase in both revenue and net income following its recent quarterly results. Specifically, they forecast Q2 revenue at $28.8 billion, which would signify a 38% year-over-year increase. Furthermore, operating profit margins of 48% indicate a robust operational performance and an increase from previous periods. TSMC's expectation of doubling revenue from AI accelerators in 2025 further underscores its positioning within the booming AI chip sector. The consensus estimates project that TSMC's Earnings Per Share (EPS) will rise by 31% this year, a strong indicator of growth potential. This can generate positive investor sentiment and possibly a higher valuation, driving the stock price higher.TSMC currently trades at 22 times earnings, indicating a valuation that could incentivize buying, especially if projected earnings hold or exceed expectations. The company is well-equipped to respond to customer demands, especially from major players like Nvidia and Apple, further validating its strong growth outlook.On the other hand, **SoundHound AI** has faced significant market challenges, with stocks dropping nearly 55% so far this year. However, its impressive projections for a 162% year-over-year increase in revenue indicate it could be undervalued despite its sky-high price-to-sales ratio of 36. With cumulative subscriptions and a substantial backlog showing strong growth, investors may find SoundHound AI attractive, particularly if the broader market sentiment shifts positively with trade developments. The potential growth trajectory of the conversational AI market, which is projected to grow significantly, provides a further cushion for SoundHound's growth potential. Investors will likely keep an eye on both companies as the effect of trade negotiations plays out in the coming months. Early adaptability by TSMC could place it as a preferred investment within the semiconductor space, while investors might view SoundHound as a growth opportunity that, despite its current challenges, may yield positive returns in the longer term based on fundamental growth metrics.

Stocks: TSM SOUN