Key Apple Supplier's Stock Soars To All-Time High, Fueled By AI Demand And Nvidia Upgrade

The shares of Taiwan Semiconductor Manufacturing Co Ltd TSM surged to an all-time high on Thursday following a significant price target increase for chip designer NVIDIA Corp NVDA by Morgan Stanley.

What Happened: TSMC experienced a substantial increase in its share price after Morgan Stanley raised Nvidia’s price target to $750 from $603 on Feb. 7, reported CNBC. This move was attributed to the ongoing surge in demand for AI.

The shares of TSMC opened at NT$709 on Thursday and closed at NT$697, marking an almost 8% increase from the previous close on Feb. 5. This surge followed the resumption of trading on the Taiwan Stock Exchange after the Chinese New Year break.

TSMC is the world’s leading producer of advanced processors and a key supplier for Nvidia and Apple.

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Nvidia, a major player in the AI sector, is expected to benefit significantly from the AI boom that began in 2022. The increased interest in generative AI, sparked by the launch of OpenAI’s ChatGPT, has led to a surge in demand for Nvidia’s GPUs.

"B100 transition an important near term driver, impacting H100 lead times and competitive dynamics," wrote Morgan Stanley analysts in the Feb. 7 report to clients. Analysts anticipate that Nvidia’s B100 GPU will revolutionize the AI landscape, surpassing the power of its H100 AI processor.

TSMC is currently producing 3-nanometer chips and aims to commence mass production of 2-nanometer chips by 2025.

Why It Matters: TSMC’s shares have been on an upward trajectory, driven by a series of strategic moves. The company is expanding its chip production beyond Taiwan, with plans to construct a second factory in Japan. This new facility, expected to be operational by the end of 2027, will manufacture 6-nanometer chips, marking the most advanced semiconductors produced in Japan.

This development is expected to enhance Japan’s domestic semiconductor production capabilities, aligning with Japanese Prime Minister Fumio Kishida‘s efforts to boost the country’s tech industry.

Analysts have also expressed optimism about TSMC’s future, with Needham analyst Charles Shi believing that TSMC is well-positioned to absorb excess capacity and rebalance supply and demand by the end of 2024, setting the stage for significant improvements in 2025.

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