Another blowout quarter from artificial intelligence giant Nvidia should bode well for shares of this derivative play, according to Bank of America. Analyst Brad Lin lifted his price target on U.S-listed shares of Taiwan Semiconductor Manufacturing to $125, representing 35% upside from Thursday’s close. He cited “sustainable and strong” demand for AI products, which should meaningfully benefit the leading AI chipmaker and maker of edge nodes and advanced packaging. TSM YTD mountain Taiwan Semiconductor shares in 2023 “We are witnessing an AI arms race, reflected by strong demand from global hyperscalers (50-55% mix in 2Q), consumer internet companies, and enterprise despite macro uncertainties,” he wrote. “TSMC, the leading supplier for most AI chips, should benefit meaningfully.” So far this year, shares of Taiwan Semiconductor have jumped about 23%, while Nvidia shares have more than doubled. Lin views Taiwan Semiconductor’s valuation as attractive at nearly 14 times price-to-earnings, and near the lower end of its historical range. An acceleration in chip-on-wafer-on-substrate capacity at the company — to as much as 25,000 a month by the end of next year — should help ease current supply tightness, he wrote, expecting Nvidia to account for more than 50% of that output. AI may only account for about 6% of Taiwan Semiconductor’s revenue at present, but Lin forecasts it to grow 50% in the next five years. “In our view, greater upside can be expected with rising GPU/ASICs demand from AMD, Marvell, Broadcom with the accelerated computing uptrend,” he wrote. — CNBC’s Michael Bloom contributed reporting
