The AI revolution has taken semiconductor stocks and their gains to the next level, with most producers recording gains of 50% or more since 2024, driven by unprecedented demand for AI-related technologies and components. Taiwan Semiconductor (NYSE: TSM) stock is no exception.
TSMC became the leading foundry by revenue in the first quarter, capturing 62% of the market share. Taiwan Semiconductor Manufacturing anticipates up to 30% sales growth in the second quarter, driven by strong demand for semiconductors in artificial intelligence applications.
Generative AI (GenAI) has the ability to create new content across various mediums, including images, videos, code, and marketing materials.
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This capability promises substantial efficiency gains and paves the way for innovative, creative opportunities, providing a significant competitive advantage.
Semiconductor industry, led by Nvidia (NASDAQ: NVDA), is grappling with a significant challenge. The surge in AI technology has led to a skyrocketing demand for advanced AI graphical processing units (GPUs), which the industry is struggling to meet.
Geopolitical tensions between the U.S. and China present significant risks for TSMC. The U.S. ban on supplying advanced chip technology to China and the Middle East affects TSMC’s market access and growth prospects. Furthermore, Taiwan’s strategic position and the looming threat of a potential Chinese invasion contribute to investor uncertainty regarding TSMC’s long-term stability.
What are analysts saying about TSM stock
Building on this performance, several analysts have revised their price targets for TSMC stock.
Barclays analyst Simon Coles raised the price target for Taiwan Semiconductor Manufacturing stock to $170, up from $150, while maintaining an ‘overweight’ rating.
Mark Li at Bernstein believes TSMC stock will continue its strong performance throughout 2024, showing ‘impressive growth’ as post-pandemic supply chains stabilize and demand for artificial intelligence hardware increases. He set a price target of $150 and a ‘buy’ rating.
Morningstar analyst Phelix Lee also takes a long-term view, noting that TSMC is at the forefront of trends that ‘may last for decades.’ However, he maintains his price target at $146 per share.
Needham supports this positive outlook, with analyst Charles Shi stating in a note to clients that the reduced industry outlook was primarily due to lowered expectations for automotive semiconductors. This sector has not rebounded as quickly as anticipated, which could impact overall growth projections. Despite this, he reiterated a ‘strong buy’ rating for TSMC stock with a $168 price target.
Nvidia could spur further TSMC growth
Nvidia’s CEO Jensen Huang said on June 4 that the company plans to increase its investments in Taiwan despite the island’s geopolitical uncertainties.
He emphasized the importance of the local chip supply chain and Nvidia’s decades-long relationship with Taiwan Semiconductor Manufacturing.
‘We build many things in Taiwan because TSMC is so good. TSMC is incredible… Advanced technology, incredible work ethic, and super flexible. The two companies have been working together for a quarter century or longer, so we know each other’s rhythm,’ Huang said.
Speaking to reporters in Taipei, Huang confirmed that Nvidia, the world’s most valuable chip company, intends to build another supercomputer in Taiwan. This follows last year’s launch of Taipei-1, which Nvidia owns and operates in the southern part of the island. The location for the new investment has not yet been decided.
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