14 analysts upgraded this global AI chip stock in the past 2 weeks
There’s been so much love for one global chip stock that as many as 14 analysts upgraded it in the past two weeks. That’s Taiwan’s TSMC , or Taiwan Semiconductor Manufacturing Company. The stock’s been soaring on the artificial intelligence boom. It’s up around 35% so far this year, and 60% since a year ago. There’s strong demand for advanced chips, especially those used in AI applications. TSMC is the world’s largest producer of advanced processors, and Nvidia depends on it to manufacture its graphics processing units. Last month, the chipmaker announced results that beat revenue and profit expectations in the first quarter. That’s thanks to strong demand for advance chips, especially those used in AI applications. Based on a CNBC Pro FactSet screen, 14 analysts upgraded the stock in the past two weeks, and none downgraded it. Those covering the stock say they are optimistic in light of AI demand, among other factors. “TSMC’s shares remain attractive, as artificial intelligence-related demand continues to pleasantly surprise us, and there is limited downside to sentiment for the automotive and industrial markets,” said Phelix Lee, equity analyst at Morningstar. Furthermore, he added, TSMC’s “disciplined approach” to capital spending this year and possibly in the next few years reduces oversupply risks. The surprise revenue comes from AI server orders being shipped faster than expected. “[That illustrated] TSMC’s prowess at removing bottlenecks at the advanced packaging stage,” Lee said. One risk that investors tend to consider for such chip stocks is U.S.-China trade restrictions, said Dan Kim, senior investment analyst at Saturna Capital. But he believes it’s overblown. “Every time US/China trade restriction news comes out, the semi group (including TSMC) generally gets punished,” he told CNBC Pro. “In reality the opposite is happening. Without access to leading edge equipment, China has to order more legacy equipment to keep up with the West. This “inefficiency” has been estimated to likely create an additional ~10% in equipment demand over time,” Kim added. When it comes to AI, Kim also said that each large language model upgrade cycle requires roughly 100 times more in compute capacity upgrades. ChatGPT is currently in its fourth version, and he noted that the world is aiming for GPT8. He noted that TSMC is trading at 10% above its five-year historical median price-to-earnings ratio (PE) of 20.3. It would be “attractive set-up to be long the stock” if its valuation goes back to that 20.3 PE, and assuming the above AI trend plays out, he said. According to FactSet, TSMC has a 95% buy rating from analysts, who give it 16.3% potential upside based on the consensus price target of 932.98 New Taiwan dollars ($28.74). TSMC is also listed in the U.S.
:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-1169041231-5052d200552d467baab33417938984a3.jpg "10 Low-Risk Income Sources for a Safer Retirement")
:max_bytes(150000):strip_icc():format(jpeg)/business-team-investment-entrepreneur-trading-discussing-and-analysis-graph-stock-market-trading-stock-chart-concept-1089940388-acef8549576a4d918cb157c6c88ec8a1.jpg "Introduction to Phantom Stocks and SARs")
:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-991180154-aad62bea33e2473a808a24eb81b8e068.jpg "How the Minimum Wage Impacts Unemployment")
