Two Stocks Are Quietly Beating Nvidia, and Wall Street Wants Them 30% Higher
Nvidia stock (NVDA) is trading near record highs at $225.30, up about 7% this week, ahead of its August 26 earnings report. Yet history carries a warning. The stock has dropped the day after earnings six times since August 2024, and each time its own chipmaker, Taiwan Semiconductor (TSM), took the hit better.
Analysts now rate TSMC a Strong Buy with about 27% upside. And a second supplier, Ciena (CIEN), has outrun Nvidia sixteen times over this past year. Here is why the pattern could repeat, and who wins if it does.
Why Nvidia Stock Could Fall Again on August 26
February 26, 2026 shows how it happens. Nvidia beat estimates with $1.62 per share, grew revenue 94% to $68.13 billion and guided above forecasts. The stock still dropped 5%.
Why?
Investors fixated on two things the beat could not fix. Nvidia was earning slightly less on each sale, and its China outlook had been cut to zero.
However, those same pressures are back, and the bar now sits higher. Nvidia has promised about $91 billion in revenue, but Bank of America expects $94 to $95 billion. Anything short of a large beat now counts as a letdown.
Meanwhile, Nvidia’s latest results promise it will keep roughly 75 cents of every sales dollar. Any slip reads as fading pricing power. And the H20, the chip Nvidia built for China, once earned $4.6 billion a quarter but stays locked out of forecasts by export rules.
The crowding makes it worse. Nvidia is the most actively traded stock in the US, so any disappointment meets a rush for the same exit.
A handful of stocks now dominate US market trading:
— The Kobeissi Letter (@KobeissiLetter) August 11, 2026
Nvidia, $NVDA, is the most actively traded stock in the US market, accounting for 3.0% of total market notional volume year-to-date.
This is followed by Micron, $MU, at 2.8%, Tesla, $TSLA, at 2.1%, and SanDisk, $SNDK, at 1.5%.… pic.twitter.com/kGcYNFYBKb
That is why Goldman Sachs flags the sell-the-news risk, with the S&P 500 also at a record high. When everyone says buy and the price assumes a blowout, just meeting estimates gets sold.
So where does the money hide when Nvidia dips? Six times in a row, the answer has been the same.
The Foundry That Absorbed Every Shock
That answer is TSMC. Across all six negative reactions since August 2024, it fell just 1.76% on average against Nvidia’s 4.34%, based on Nasdaq closing prices. In May 2026, it even rose 1.38%.
The reason is business-centric. TSMC builds chips for Nvidia, AMD, Apple, Broadcom and custom designers, so demand lost by one customer often returns through another.
BREAKING: Taiwan Semiconductor, $TSM, reported a +45% YoY increase in sales in July, to $14.5 billion, driven by explosive demand for AI chips.$TSM, the primary chip manufacturer used by companies such as Nvidia, $NVDA, and Apple, $AAPL, generated $89.1 billion in revenue in… pic.twitter.com/gxxDwf8BSG
— The Kobeissi Letter (@KobeissiLetter) August 10, 2026
The cushion shows over time too, with TSMC returning 154% since August 2024 against Nvidia’s 79%.
Analysts have noticed. The TipRanks forecast shows a Strong Buy from six Buys and one Hold, with a $545.67 target, about 30% above the $430.49 price.
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For context, its Taipei-listed shares trade near NT$2,415, about $86 each, with five making one US-listed share. Still, TSMC is not the only supplier winning.
Ciena Wins the Bigger AI Trade, Not the Earnings Trade
The other winner is Ciena, and its edge sits outside the earnings pattern. The firm sells the optical links that move data between AI servers, and demand has exploded. Its market value gained about 375% in a year against Nvidia’s 23%, a sixteenfold gap on S&P Global data.
The business backs the rally. Revenue grew 40% last quarter, earnings nearly quadrupled, and orders worth $7 billion wait to be filled.
Still, conviction lags the run. The Ciena forecast shows only a Moderate Buy from ten Buys and four Holds. Even so, the average target of $583 sits about 32% above the $442.79 close, upside that rivals TSMC’s.
That leaves TSMC as the stronger analyst pick, and Ciena as the momentum play among AI stocks whose ratings have not caught up.
One Theory Connects All Three
Put them side by side and the story is diversification against dependence. Nvidia needs one architecture to keep clearing ever-higher expectations. TSMC collects from every racer, keeping 67.7 cents of each sales dollar in gross profit per its quarterly results, while Ciena wires the race itself.
In short, Nvidia stock is a bet on a winner. TSMC and Ciena are bets on the race continuing, which is why they keep absorbing the shocks Nvidia cannot.
Analyst’s view: The market still treats Nvidia’s earnings as the overall AI verdict. However, the strongest conviction sits elsewhere. If August 26 disappoints, the winning trade will not be buying the Nvidia dip. It will be owning the company Nvidia cannot build chips without, its foundry TSMC, with Ciena wiring the race around it.