The global fascination with artificial intelligence (AI) continues to overshadow geopolitical worries surrounding Taiwan Semiconductor Manufacturing Co. (TSMC) as its stock rally continues unabated. Foreign investors have significantly increased their ownership of the stock, reaching a two-year high, affirming TSMC’s assertion that AI will be its main growth driver this year. With over 90% of the market share in manufacturing advanced semiconductors used in AI, TSMC remains at the forefront of this rapidly expanding industry.
The remarkable recovery of TSMC’s stock price comes on the heels of a challenging year. In 2022, the company experienced a steep decline of 27%. During this period, renowned investor Warren Buffett sold his $5 billion worth of TSMC holdings, explicitly citing geopolitical tensions associated with the location of the company. Additionally, Taiwan’s election of a US-friendly president, Lai Ching-te, compounded concerns, with Beijing labeling him an “instigator of war.”
However, despite the perceived risks posed by geopolitical factors, TSMC’s strategic position in the market and the growing desire to establish local supply chains have transformed these challenges into tailwinds for the company. Bernard Ahkong, co-CIO at UBS O’Connor Global Multi-Strategy Alpha, emphasized that the semiconductor industry is still in the early stages of an upcycle.
The primary worry surrounding TSMC revolves around its heavy reliance on chip manufacturing in Taiwan. As the largest producer of advanced logic semiconductors globally, any military escalation in the region could severely disrupt the global supply chain. Additionally, TSMC holds over 50% of the overall foundry market, positioning itself well to achieve or surpass its long-term growth targets of 15-20%, according to Pictet.
In the first two months of this year, TSMC’s revenue increased by 9.4% due to accelerated demand in AI-related activities, offsetting the slowdown in iPhone sales. The company’s shares have more than doubled since reaching their lowest point in October 2022, largely supported by the success of key customer Nvidia Corp.
TSMC is actively addressing market concerns by diversifying its operational bases. The company plans to construct a second fabrication plant in Japan, and its Kumamoto factory is scheduled to commence production this year. TSMC is also establishing two advanced facilities in Arizona and a factory in Germany.
Despite the apprehensions surrounding geopolitics, TSMC remains an essential component for investors seeking exposure to AI and the broader recovery of the semiconductor industry. Emerging markets lack companies of comparable quality, making TSMC a fundamental building block for investment, according to Gary Tan, a portfolio manager at Allspring Intrinsic Emerging Markets Equity.
As the demand for AI continues to surge, TSMC’s position atop the semiconductor manufacturing sector appears secure. The company’s proactive efforts to diversify and expand its operations globally demonstrate its commitment to maintaining a robust supply chain and meeting the needs of an ever-evolving industry.
FAQ
1. Why is AI considered TSMC’s primary growth driver?
– TSMC has more than a 90% market share in manufacturing advanced semiconductors used in AI, making it a market leader in this rapidly expanding industry.
2. What were the previous concerns surrounding TSMC?
– Geopolitical tensions, particularly those related to its location in Taiwan and the election of a US-friendly president, cast doubts on TSMC’s long-term stability.
3. How has TSMC addressed market concerns?
– TSMC is actively diversifying its operations by constructing a second fabrication plant in Japan, commencing production at its Kumamoto factory, and establishing advanced facilities in Arizona and Germany.
4. What impact has demand for AI had on TSMC’s revenue?
– TSMC’s revenue increased by 9.4% in the first two months of this year due to accelerated demand in AI-related activities, offsetting the slowdown in iPhone sales.
5. Why is TSMC considered a fundamental building block for AI and semiconductor investments?
– TSMC holds a significant market share and demonstrates a commitment to quality that is lacking in other companies within emerging markets. This positions the company favorably for investors seeking exposure to AI and the broader semiconductor industry.
Source: [Bloomberg](https://www.bloomberg.com/)
The global fascination with artificial intelligence (AI) has led to significant growth in the semiconductor industry. Taiwan Semiconductor Manufacturing Co. (TSMC) has emerged as a market leader, with over 90% of the market share in manufacturing advanced semiconductors used in AI. This has positioned TSMC at the forefront of this rapidly expanding industry. The company has seen a remarkable recovery in its stock price, reaching a two-year high, as foreign investors recognize the potential of AI as TSMC’s main growth driver.
Despite a challenging year in 2022, which saw a decline in stock price and concerns over geopolitical tensions, TSMC has overcome these obstacles and turned them into opportunities. The company’s strategic position in the market, coupled with the growing desire to establish local supply chains, has bolstered TSMC’s growth prospects. The semiconductor industry is still in the early stages of an upcycle, according to Bernard Ahkong, co-CIO at UBS O’Connor Global Multi-Strategy Alpha.
One of the primary concerns surrounding TSMC is its heavy reliance on chip manufacturing in Taiwan. Any military escalation in the region could severely disrupt the global supply chain, as TSMC is the largest producer of advanced logic semiconductors globally. However, TSMC’s market dominance and plans for diversification have positioned the company to achieve or surpass its long-term growth targets of 15-20%.
TSMC’s revenue has already shown signs of growth in 2023, with a 9.4% increase in the first two months of the year. This growth primarily comes from accelerated demand in AI-related activities, offsetting the slowdown in iPhone sales. The success of key customer Nvidia Corp. has also contributed to the company’s stock rally.
To address market concerns, TSMC is actively diversifying its operational bases. The company has plans to construct a second fabrication plant in Japan, and its Kumamoto factory is set to commence production this year. TSMC is also establishing two advanced facilities in Arizona and a factory in Germany. These efforts demonstrate TSMC’s commitment to maintaining a robust supply chain and meeting the needs of an ever-evolving industry.
Investors looking to capitalize on the AI boom and the recovery of the semiconductor industry see TSMC as a fundamental building block for their investments. The company’s market leadership, commitment to quality, and proactive approach to diversification make it a reliable choice. TSMC’s position atop the semiconductor manufacturing sector appears secure as the demand for AI continues to surge.
Sources:
– Bloomberg
The source of the article is from the blog procarsrl.com.ar