TSMC nears US$1 trillion valuation as target upgrades boost rally

John Cheng, Bloomberg News

The bullish chorus on Taiwan Semiconductor Manufacturing Co. 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 have lifted their price targets for TSMC this week, citing surging AI-related demand and potential price hikes in 2025 to drive up earnings. Goldman Sachs Group Inc. is the most bullish of all, increasing its price target by 19 per cent to NT$1,160 as it sees three- and five-nanometer chip manufacturing prices advancing by a “low single digit percentage.”

JPMorgan Chase & Co. says TSMC may “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 per cent 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 artificial intelligence, with its cutting-edge technology and valuation making it a favourite 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 overtook Berkshire Hathaway Inc. last week to become the eighth-largest company globally in terms of market capitalization, based on the firm’s U.S.-listed ADRs. The depositary receipts’ 73 per cent gain this year has boosted the firm’s market value to $932 billion, shy of the $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 wrote in a note on Tuesday. “With the ongoing proliferation of AI, we see TSMC among the key beneficiaries.”