Amidst growing global concerns over geopolitical issues, the record-breaking stock rally of Taiwan Semiconductor Manufacturing Co. (TSMC) continues to surge, propelled by the increasing hype surrounding artificial intelligence (AI).
Foreign investors, recognizing the potential growth that AI offers, have significantly boosted their ownership of TSMC stock, pushing it to a two-year high. TSMC holds a staggering 90% market share in the production of advanced semiconductors used for AI applications, making it a key player in this rapidly expanding sector.
TSMC experienced a remarkable turnaround last year after enduring a 27% drop in stock prices in 2022. The sell-off by renowned investor Warren Buffett, who cited geopolitical tensions as a reason for divesting his $5 billion TSMC holdings, added to the concerns surrounding the company’s location. In addition, the election of Lai Ching-te, a US-friendly president, in Taiwan further heightened anxieties due to Beijing’s description of him as an “instigator of war.”
Surprisingly, however, the strategic nature of TSMC’s products and the increasing desire to establish local supply chains have transformed geopolitical concerns into a positive force for the company. Bernard Ahkong, co-CIO at UBS O’Connor Global Multi-Strategy Alpha, believes that geopolitics has become a tailwind for the semiconductor industry as a whole, propelling it into a new phase of growth.
The main concern surrounding TSMC revolves around its heavy reliance on chip manufacturing in Taiwan. The island is responsible for the majority of the world’s advanced logic semiconductors, making it vulnerable to any military escalations in the region. Furthermore, TSMC commands over 50% of the overall foundry market, positioning the company strongly to meet or surpass its long-term growth targets.
Despite these concerns, TSMC’s revenue has already seen a 9.4% increase in the first two months of the year, driven by the rising demand for AI-related activities, which has offset a slowdown in iPhone sales. TSMC’s shares have more than doubled since hitting a low point in October 2022, fueled in part by the strong performance of its prominent customer, Nvidia Corp.
To address market anxieties, TSMC is actively diversifying its operations. The company has announced plans to build a second fabrication plant in Japan, while its Kumamoto factory in Japan is set to commence production later this year. Additionally, TSMC is investing in two advanced facilities in Arizona, USA, and constructing a factory in Germany.
Despite geopolitical concerns, many market experts view TSMC as an essential component in gaining exposure to AI and the broader semiconductor market recovery. Gary Tan, a portfolio manager at Allspring Intrinsic Emerging Markets Equity, emphasizes TSMC’s unique position as a fundamental building block, especially considering the scarcity of companies with comparable quality in emerging markets within this industry.
Source: Bloomberg.com
Amidst the hype surrounding artificial intelligence (AI), the stock rally of Taiwan Semiconductor Manufacturing Co. (TSMC) continues to surge. TSMC holds a staggering 90% market share in the production of advanced semiconductors used for AI applications, making it a key player in this rapidly expanding sector. The increasing desire to establish local supply chains has transformed geopolitical concerns into a positive force for the company, propelling it into a new phase of growth.
TSMC’s heavy reliance on chip manufacturing in Taiwan is a major concern due to the island’s vulnerability to military escalations in the region. However, the company’s revenue has already seen a 9.4% increase in the first two months of the year, driven by the rising demand for AI-related activities. TSMC’s shares have more than doubled since hitting a low point in October 2022.
To address market anxieties, TSMC is actively diversifying its operations. The company has announced plans to build a second fabrication plant in Japan and its factory in Kumamoto, Japan, is set to start production later this year. TSMC is also investing in two advanced facilities in Arizona, USA, and constructing a factory in Germany.
Many market experts view TSMC as an essential component in gaining exposure to AI and the broader semiconductor market recovery. The scarcity of companies with comparable quality in emerging markets within this industry further emphasizes TSMC’s unique position as a fundamental building block.
The source of the article is from the blog lokale-komercyjne.pl