TSMC Stock Hits Record High Amid Surge in AI Demand
On Tuesday, Taiwan Semiconductor Manufacturing Company Limited (TSMC) experienced a record-high share price in Taipei, driven by increased profits from key customers, including NVIDIA Corporation (NVDA). TSMC’s shares have risen 99.3% this year, positioning the stock for its best annual performance since 1999. This growth is largely attributed to the booming generative artificial intelligence (AI) market.
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With TSMC stock’s upward trajectory, investors may wonder if it’s a smart buy for the upcoming year. Let’s explore.
New Chip Technology Launch Planned for 2025
TSMC is working on its innovative 2-nanometer (nm) chips, set to launch in 2025. Full-scale production is expected to start in 2026, with pre-order demand already exceeding that of TSMC’s 3nm and 5nm chips.
The 2nm chips incorporate advanced nanosheet transistor technology, promising to decrease energy consumption by 25-30%, enhance battery life, and reduce costs. As the demand for 3nm chips persists, this upcoming technology is poised to further elevate TSMC’s stock value in the coming year.
Diverse Growth Opportunities for TSMC
TSMC caters to various industries, producing chips not only for graphics processing unit companies like NVIDIA but also for smartphones made by Apple Inc (AAPL) and QUALCOMM Incorporated (QCOM). Recently, both Apple and QUALCOMM saw a rise in smartphone sales, which bodes well for TSMC’s prospects.
Additionally, TSMC creates custom chips for companies such as Marvell Technology, Inc. (MRVL) and Broadcom Inc. (AVGO), both of which have placed large orders to fulfill the demand for custom AI chips. This diversified clientele lessens TSMC’s dependence on NVIDIA, presenting multiple avenues for growth.
Semiconductor Market Growth is a Boost for TSMC
According to Precedence Research, the global semiconductor market is projected to generate over $2 trillion in revenues by 2032, growing at a compound annual growth rate (CAGR) of nearly 15%. McKinsey further predicts that this market will exceed $1 trillion in annual revenues by 2030.
This expanding market landscape is expected to benefit TSMC significantly, as it holds a commanding 62% market share as the largest semiconductor foundry. Meanwhile, competitors like Intel Corporation (INTC) are downsizing their foundry operations, creating a favorable environment for TSMC.
TSMC: A Recommended Buy
Given TSMC’s advanced chip technology, diverse business model, and strong market presence, the stock appears to be a promising investment for the new year. Earnings per share are projected to rise by 19.8% compared to last year, with a Zacks Consensus Estimate of $6.95.
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Analysts have raised the average short-term price target for TSMC to $226.14, up from the previous close of $197.21, with a highest target of $250, indicating a potential upside of 26.8%.
Image Source: Zacks Investment Research
Currently, TSMC holds a Zacks Rank #2 (Buy) (read more: 3 Reasons to Buy TSM Stock Besides 54% Q3 Net Profits Surge).
Additionally, you can view the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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