The bullish chorus on Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is growing even louder, as a stock rally puts its market capitalization closer to the US$1 trillion milestone.
A flurry of Wall Street brokerages this week have lifted their price targets for TSMC, citing surging artificial intelligence (AI) related demand and potential price hikes to drive up earnings.
Goldman Sachs Group Inc is the most bullish, increasing its price target by 19 percent to NT$1,160, as it sees 3 and 5-nanometer chip manufacturing prices advancing by a “low single digit percentage.”
Photo: Grace Hung, Taipei Times
JPMorgan Chase & Co said TSMC might “lift its 2024 revenue guidance and potentially move up its capex to the higher end of the guidance range,” and expects AI to contribute 35 percent of total sales by 2028.
Citigroup Inc and Morgan Stanley also raised their price targets on a stronger earnings outlook.
The foundry sector leader has emerged as a major beneficiary of the widening adoption of AI, with its cutting-edge technology and valuation making it a favorite play among global investors. TSMC has also prospered from being the main advanced-chip supplier of Nvidia Corp — recently crowned the world’s most valuable company.
TSMC shares yesterday rose 4.03 percent to close at a new high of NT$981 in Taipei trading, after hitting an intraday high of NT$984, in the wake of a 3.51 percent rise in Nvidia stock on Wall Street overnight.
The Taiwanese chipmaker last week overtook Berkshire Hathaway Inc to become the eighth-largest company globally in terms of market capitalization, based on the firm’s American depositary receipts (ADRs). The ADRs’ 73 percent gain this year has boosted TSMC’s market value to US$932 billion, shy of the US$1 trillion threshold.
“We now see even more attractive risk-reward for TSMC amid the growing, positive sentiment around AI,” Goldman analysts including Bruce Lu (呂昆霖) wrote in a note on Tuesday. “With the ongoing proliferation of AI, we see TSMC among the key beneficiaries.”
Separately, TrendForce Corp (集邦科技) yesterday said that TSMC is considering price hikes for advanced process technology nodes in the second half of this year, in a bid to absorb higher utility and construction costs for its overseas fabs.
TrendForce did not give precise forecast about how much TSMC would increase prices. Speculations have been circulating that the price hikes for 3-nanometer chips could be around 5 percent since early this month.
TSMC chairman C.C. Wei (魏哲家) told reporters on June 4 that there was room for price upticks as the firm offered the most cost-effective chips to customers.
Strong appetite for 3, 4 and 5-nanometer technologies — which are used to produce advanced chips for devices with AI features and to make high-performance computing chips for data centers — gives TSMC leeway to negotiate for better prices, the Taipei-based researcher said in a report.
The chipmaker’s manufacturing equipment to produce 3, 4 and 5-nanometer chips are operating at full capacity and would exceed 100 percent in the third and fourth quarters, TrendForce said.
The order visibility could even go further to next year, it added.
Smaller foundry companies Powerchip Semiconductor Manufacturing Corp (力積電子) and Vanguard International Semiconductor Corp (世界先進) are also expected to see their factory utilization improve to between 70 percent and 80 percent later this year, but they are unlikely to raise prices as demand for mature technology remains muted, TrendForce said.
Additional reporting by Lisa Wang
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