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TSMC’s $59 Billion Rally May Extend on AI Demand

A rally in Taiwan Semiconductor Manufacturing Company Ltd. may get a fresh push as renewed optimism over artificial intelligence offsets concerns about China relations after Taiwan’s presidential election.

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Company’s shares lagging as global chip stocks regain highs

Shares of the world’s largest foundry have rallied 12% from a September low, adding $59 billion to its market value, as investors bet on a recovery in the global chip industry after more than a year of inventory correction. Daily call options volume on TSMC’s American depositary receipts has been building recently on bullish bets ahead of the company’s earnings report due Thursday.

Still, the shares remain 15% below their record level set two years ago, even as its global chip peers and A-list clients including Nvidia Corp. have regained all-time highs on AI hype and the gradual rebound in broader chip demand.

Given the muted geopolitical reaction to the Taiwan leadership vote, some investors expect a catch-up in TSMC, with the average price target implying a gain of 20% over the next year.

TSMC shares may rise further on low valuations combined with the company’s better-than-expected sales and likely price hikes, he added.

The consensus forward earnings estimate for TSMC has climbed back to a record high, as the company beat fourth-quarter revenue expectations. The stock has 35 buy ratings versus two holds and no sells.


Image: TSMC