Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is close to reclaiming a spot in the world’s 10 most valuable companies, thanks to a US$42 billion rally on Thursday fueled by optimism about artificial intelligence (AI).
Investors have been piling into TSMC, a critical supplier of chips used in AI processors, ahead of sector heavyweight Nvidia Corp’s results next week. TSMC’s shares surged almost 8 percent in Taipei on Thursday, lifting its market value to US$575 billion — which ranks it 13th-largest globally. That put the stock within a US$60 billion market-cap distance from the likes of Visa Inc, Broadcom Inc and Tesla Inc.
TSMC shares have risen more than 30 percent since late September last year thanks to AI-fueled optimism, and there is potential for further gains as well. Last month, executives at the main chipmaker to Apple Inc and Nvidia said they expect a return to solid growth this quarter amid signs of recovery in smartphone and computing demand. Nvidia’s earnings due on Wednesday next week might offer yet another catalyst.
Photo: Mike Kai Chen, Bloomberg
“The surge in TSMC’s stock price mirrors investor optimism about the future growth prospects of AI technology,” Bloomberg Intelligence analyst Charles Shum (沈明) said.
“The company is the most critical supplier of Nvidia’s AI chips,” he added.
Not everything points to a further rally. The recent advance has put the stock in overbought territory, a technical hurdle. Any signs of trouble in the AI space or disappointment from Nvidia’s earnings might also send the shares downward.
However, TSMC has a lot of fans. Morgan Stanley lifted its target price on the stock, and expects the market to boost its valuation. The stock also has the highest recommendation consensus rating among global semiconductor manufacturers with market value of more than US$20 billion, data compiled by Bloomberg showed.
Option traders predict the gains would continue — the number of outstanding bullish contracts is close to a record high in the US, data compiled by Bloomberg showed.
Valuation also does not appear demanding for TSMC, with the stock trading at 17 times forward earnings, below its five-year average of 18 times and 27 times for the Philadelphia Semiconductor Index.
“We forecast TSMC will generate more meaningful revenue from AI semis and believe its strategic value to the global AI supply chain is growing, which will help drive the stock to re-rate,” Morgan Stanley analysts including Charlie Chan wrote in a note this week.
If they are right, it might not be long before TSMC cracks into that top 10 market cap club.
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