Taiwan Semiconductor shares climb after chipmaker posts early 2024 sales jump

By Barbara Kollmeyer

TSMC is a 'top pick' for the AI growth story, says Morgan Stanley

Taiwan Semiconductor Manufacturing Corp. reported a 9.4% rise in January-February sales versus the year ago period, likely boosted by increased demand for chips that can cater to artificial intelligence software.

In a statement, the world's biggest chipmaker (TW:2330) (TSM) said consolidated net revenue for the two-month period rose to NT$397.43 billion ($12.6 billion), from NT$363.22 billion in the same period of 2023.

U.S.-listed shares of the company that produces chips for Apple (AAPL) and Nvidia (NVDA) rose 4% in premarket trading, after similar gains in Taipei. Shares of Nvidia were up over 3%

TSMC reported higher fourth-quarter net income in January, and a 13.6% gain in revenue from the prior quarter, citing demand for the company's most advanced chip offerings. The late 2023 revenue jump also fueled hopes that a global chip slump was ending.

In a note to clients dated Thursday, Morgan Stanley analysts boosted their TSMC price target to NT$850 from NT$758, saying the chipmaker is now a "top pick."

"U.S. investors appear to see TSMC as the key proxy to play globalAI growth, and view the stock's 2025 valuations as attractive," said a team of analysts led by Charlie Chan, who rate the company overweight.

Chan noted some differences for the company for 2024 versus 2023, such as the fact that generative AI semi is an "obvious growth driver" from merely a "positive trend" last year, while geopolitical concerns have eased due to overseas fab expansion by TSMC.

As well, more "U.S. generalists and software-sector specialists are researching the AI semi supply chain, implying more fund flows may come," said Chan.

Earlier this week, JPMorgan analyst Gokul Hariharan lifted his own price to NT$850 per share from $NT770. The analyst said AI-related revenues should soar to 25% by 2027, and noted signs in the supply chain indicating Intel (INTC) was expanding outsourcing to TSMC for the most advanced 3 nanometer technology chips.

"We see TSMC emerging as the enabler for almost all AI processing at the datacenter and the edge, with meaningful growth from AI in the next 3-4 years," said Hariharan.

Shares of TSMC chip-making rival Broadcom were down 2% in premarket trading after the company indicated late Thursday that AI-related business units were exceeding expectations, but that others were seeing weakness.

-Barbara Kollmeyer

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03-08-24 0623ET

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