(Bloomberg) — Taiwan Semiconductor Manufacturing Co. Ltd.’s market capitalization briefly surpassed $1 trillion after Morgan Stanley joined the list of brokers that raised their price targets for the chipmaker ahead of its earnings release.
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TSMC’s ADR shares reached the milestone on Monday, rising 4.8% shortly after the New York market opened, bringing the company’s shares up more than 80% so far this year. The Taiwanese chipmaker, whose ADRs trade at a much higher price than its shares traded on the Taipei Stock Exchange, overtook Berkshire Hathaway in early June to become the world’s eighth-largest company.
“TSMC’s ADRs approaching a $1 trillion valuation would be a big feat, but technology advances will continue until at least the 2040s,” said Morningstar analyst Felix Li.
TSMC is popular among global AI investors because it is the sole supplier of Apple and Nvidia’s most important chips. The $3 trillion market capitalization companies have seen their stock prices soar along with the AI wave, making their essential chip makers look cheap in comparison. Amid rising tensions in the Taiwan Strait, Wall Street brokerages have raised their target prices for TSMC one after another, citing a surge in AI-related demand and the possibility of a rise in the stock’s price in 2025 as revenues rise.
TSMC’s ADRs have outperformed its Taipei shares because they are more accessible to foreign investors, and they are fungible, unlike the Taiwan shares, which require special regulatory approval to convert into U.S. shares.
Analysts raise targets
Monday’s gains came after Morgan Stanley raised its price target on the company’s shares by about 9%, predicting that the company will raise its full-year revenue forecast when it reports earnings next week. The broker also believes that TSMC’s strong negotiating power will allow it to raise wafer prices.
“TSMC’s ‘hanger marketing’ strategy appears to be working,” Morgan Stanley analysts including Charlie Chan wrote in a Sunday note. “TSMC appears to be sending the message that advanced foundry supplies may be tight as early as 2025, according to the latest supply chain research, and that customers may not receive adequate capacity allocations if they do not value TSMC.”
JPMorgan analysts, including Gokul Hariharan, also expect the company to raise its revenue outlook when it reports earnings.
“We hope TSMC will be more constructive on demand for AI accelerators,” he wrote in a note on Sunday.
Morgan Stanley and JPMorgan joined brokerages including Nomura Holdings Inc. and Mizuho Securities in raising optimism for TSMC’s second-quarter earnings. The company, which makes the world’s most advanced chips used by companies including Apple Inc. and Nvidia Inc., expects revenue to rise 36% from a year earlier, its best growth since the fourth quarter of 2022, according to data compiled by Bloomberg. The optimistic outlook helped send the company’s Taipei shares above NT$1,000 (about $31) last week.
TSMC shares gained attention a year ago when Warren Buffett’s Berkshire Hathaway closed its $5 billion investment in the company, highlighting geopolitical risks from China, which claims Taiwan as part of its territory. Since then, the company’s shares have continued to rise in both the U.S. and Taiwan.
Read: Popular arbitrage trade backfires as TSMC fever grows in the US
(Updates with Morningstar comment and Berkshire Hathaway)
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