Nvidia Corp (NASDAQ:NVDA) and its leading supplier, Taiwan Semiconductor Manufacturing Co (NYSE:TSM), are encountering production issues with the next generation of Nvidia's most advanced artificial intelligence chips. These challenges could delay shipments planned for this year.

Nvidia's latest designs, leveraging a new Taiwan Semiconductor manufacturing process, have faced complications with specific models in the upcoming Blackwell family of data center chips, Financial Times cites familiar sources.

Analysts project $1 trillion in spending on data centers for AI over the next five years.

However, Wall Street's anxiety about the sustainability of the AI boom has been rising. As a key AI beneficiary, analysts say Nvidia's market value has dropped by about $750 billion since mid-June.

Hedge fund Elliott Management expressed concerns in a recent letter to investors, seen by the Financial Times. The broader semiconductor industry also remains jittery as the U.S. amplified its advanced semiconductor sanctions against China.

Morgan Stanley named Taiwan Semiconductor a "top pick" after the Monday selloff. The analysts flagged Taiwan Semiconductor's quality, defensive nature, and attractive valuations, according to Bloomberg.

Taiwan Semiconductor stock gained 54% in the last 12 months.

Investors can gain exposure to Taiwan Semiconductor through iShares Semiconductor ETF (NASDAQ:SOXX) and First Trust NASDAQ Technology Dividend Index Fund (NASDAQ:TDIV).

Price Action: TSM shares traded higher by 2.01% at $150.91 premarket at the last check on Tuesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.