Taiwan Semiconductor Manufacturing Co Ltd TSM is on the brink of rejoining the world’s top 10 most valuable companies, with a market value of $575 billion, thanks to a $42 billion rally on Thursday, driven by optimism about artificial intelligence.
What Happened: TSMC, a crucial chip supplier for AI processors, experienced an almost 8% surge in its shares on Thursday, propelling its market value to $575 billion, Bloomberg reported. This places the stock just a $60 billion market cap away from companies like Visa, Broadcom, and Tesla. Once it surpasses them, it will rejoin the top-10 club, a position it briefly held in 2020.
The company’s shares have risen over 30% since late September, largely due to optimism about AI. Executives at TSMC, a key chipmaker for Apple and Nvidia, anticipate robust growth this quarter, with signs of recovery in smartphone and computing demand. Nvidia’s earnings, due on Feb. 21, could further fuel this growth.
"The surge in TSMC's stock price mirrors investor optimism about the future growth prospects of AI technology," said Bloomberg Intelligence analyst Charles Shum. "The company is the most critical supplier of Nvidia's AI chips," he added.
Despite the recent surge, TSMC’s stock is in overbought territory, and any AI sector trouble or disappointment from Nvidia’s earnings could cause a downturn. However, many analysts remain bullish on the stock, with Morgan Stanley raising its target price and predicting a valuation boost. Options traders also anticipate continued gains, with the number of outstanding bullish contracts nearing a record high in the US.
"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.
Why It Matters: TSMC’s recent surge is attributed to the ongoing demand for AI. The company’s shares hit an all-time high on Thursday following a significant price target increase for chip designer Nvidia by Morgan Stanley. This surge followed the resumption of trading on the Taiwan Stock Exchange after the Chinese New Year break.
Earlier in February, TSMC announced plans to open a second chip fabrication plant in Japan, significantly expanding its presence in the country and boosting Prime Minister Fumio Kishida‘s efforts to enhance Japan’s domestic semiconductor production capabilities. This move is expected to further strengthen TSMC’s position in the global AI supply chain.
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