TSMC Gains $42 Billion to Pass Visa as Investors Bet on AI Boom

(Bloomberg) — Taiwan Semiconductor Manufacturing Co. gained about $42 billion of market value after investors bet the chipmaker to Nvidia Corp. and Apple Inc. will become one of the biggest winners of an AI development frenzy.

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Taiwan’s largest company soared 7.9% in the first trading session after a week-long Lunar New Year break, propelling its capitalization to a record $575 billion. That was enough to surpass Visa Inc. to become the world’s 12th most valuable company. TSMC’s biggest gain in more than a year emerged after Morgan Stanley lifted its price target on the chipmaker by about 9%.

The surge propelled Taiwan’s benchmark index to a record high. TSMC last week reported a 7.9% rise in January sales, offering the latest sign of a long-awaited recovery in global consumer electronics demand.

At the same time, investors continue to pile into companies expected to ride a wave of activity in AI development that accelerated after OpenAI rolled out ChatGPT. The Philadelphia Stock Exchange Semiconductor Index climbed to a new high recently, while Nvidia’s market capitalization has soared to around $1.82 trillion — surpassing Amazon.com Inc. and Alphabet Inc.

“Taiwan’s been driven by tech, especially the AI theme,” said Xin-Yao Ng, an investment director for Asian equities at abrdn. “Nvidia has been a catalyst adding on to the sentiment, after Jensen Huang visited Taiwan, boosting investors’ appetite for AI value chain plays and Nvidia suppliers.”

Read More: TSMC’s Monthly Sales Rise in Latest Sign of Sector Recovery

The migration to bigger ChatGPT-like large language models should boost demand for higher-end chips, which benefits TSMC’s leading-edge foundry business, Morgan Stanley analysts including Charlie Chan wrote this week.

In January, TSMC executives said they expect a return to solid growth this quarter and gave themselves room to raise capital spending in 2024, suggesting the world’s most valuable chipmaker anticipates a recovery in smartphone and computing demand.

The Taiwanese company’s outlook comes after a years-long slump in tech demand. Executives also spent a chunk of time talking about the potential catalysts from AI training and development, which requires the powerful chips that TSMC excels at fabricating.

Executives from the company met with Nvidia CEO Huang last month to discuss AI chip supply constraints, a major challenge to the industry.

Read More: Taiwan Stock Index Climbs to Record High on Optimism Over AI

–With assistance from Charlotte Yang.

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