As the market's optimism about artificial intelligence resurfaces, TSMC's stock price may be further boosted.
Investors are betting that the global chip industry is about to recover after more than a year of inventory adjustments. Based on this expectation, the stock price of the world's largest wafer foundry company has rebounded 12% from its low point in September last year, with a market value increase of $59 billion.
Although TSMC's stock price is still 15% lower than the record level set two years ago, the daily call option trading volume of its American Depositary Receipts (ADRs) has been increasing recently.
Driven by the wave of artificial intelligence and the gradual rebound in broader chip demand, the stock prices of TSMC's global chip peers and first-line customers, including Nvidia, have once again reached historic highs. Some investors expect TSMC to catch up as well.
Amir Anvarzadeh, strategist at Asymmetric Advisors, said, "Given its undisputed dominant position in artificial intelligence chip production, TSMC may eventually explode." He added that due to the company's current low valuation, better than expected sales prospects, and potential price increases, TSMC's stock price may continue to rise.
Improvement of chip demand
TSMC's revenue exceeded expectations in the fourth quarter of last year, and market expectations for the company's future profits have rebounded to record highs. The stock currently has 35 buy ratings, 2 hold ratings, and no sell ratings.
As a contract manufacturer of Nvidia 5nm semiconductors, TSMC is considered a major beneficiary of the artificial intelligence boom.
In terms of smartphones, although hardware demand is recovering slowly, Apple has adopted the company's more advanced and higher priced 3-nanometer chip in its latest iPhone series.
Goldman Sachs analysts, including Bruce Lu, wrote in a report, "We are optimistic about TSMC because we believe its solid technological leadership and execution capabilities can better capture the long-term structural growth of the industry than its peers, especially in areas such as 5G or artificial intelligence."
This report also points out that TSMC's valuation remains attractive. TSMC's relatively cheap stock price is believed to support its upward trend, with an expected P/E ratio of 15 times, compared to Nvidia's expected P/E ratio of 28 times.