TSMC Returns to Global Top 10 In Valuation, But How Long Could It Stay?
2min read As the sustained optimism for Artificial Intelligence continues to push stock prices to new highs, Taiwan Semiconductor Manufacturing Company (TSMC) has finally returned to the list of the world's top ten corporations in market value.
The stock price of this world's largest semiconductor foundry surged by about 14% last week, temporarily surpassing Broadcom and Eli Lilly to be ranked the ninth in global corporate market value. Although its shares fell by more than 2% in Taiwan's stock market in early trading today, pushing its market value back below $700 billion, it remains overall higher than Broadcom.
The last time TSMC was listed in the top ten global market value was during the chip shortage in the 2020 pandemic.
Without a doubt, investor enthusiasm for generative AI has driven this year's global chip stock rally, and TSMC, a major foundry for AI chip giants like Nvidia and AMD, is almost flying neck and neck with Nvidia. The market is optimistic that TSMC is in line to benefit from the AI wave.
Analysts at Morgan Stanley and JP Morgan recently agreed that due to a surge in AI-related revenue and robust pricing power, TSMC is expected to climb further.
Last week, JP Morgan dramatically raised its target price for TSMC by 10% to NT$850, stating that the stock is a driver of almost all AI processing in data centers and edge.
Including Gokul Hariharan, JP Morgan analysts believe that by 2027, revenue related to AI will soar to 25%. Thanks to tightly integrated packaging technology, leading process technology, and the broadest customer ecosystem, TSMC's moat in the AI semiconductor field seems wider than in previous product cycles.
Charlie Chan and other Morgan Stanley analysts also pointed out in a report on March 7 that the demand for generative AI chips is undoubtedly a growth driver for TSMC.
According to options market data, investors are still rather optimistic about the outlook for TSMC's ADR in the U.S. According to data compiled from open contracts in the industry, the ratio of puts to calls has fallen to a one-month low, indicating that even as TSMC's stock continues to hit new highs, options traders are buying more calls than puts.
Of course, while TSMC has been red hot this year, it also faces risks.
On Friday, Nvidia fell over 10% from its peak, serving as a warning to some investors trying to chase the global chip rally. Similar to Nvidia, TSMC also has a clear overbought signal on the technical indicator level. This round of rise has pushed TSMC's 14-day Relative Strength Index (RSI) above 82 last week. By this measure, TSMC has become one of the most overbought stocks in Asia.
In terms of market cap, TSMC now accounts for 32.5% of Taiwan's stock market value, an undoubtedly extreme figure. Even Samsung, which is involved in many key areas of the Korean economy, only has a market cap weight of about 25%.
Interestingly, Cathie Wood, who has reduced her holdings in Nvidia multiple times over the past few months, also reduced her holdings in TSMC at the end of last month for the first time in two years.
Considering NVIDIA dropped more than 5% last Friday, is she smelling something in TSMC too?