Taiwan Semiconductor Manufacturing Company (TSMC), traded on the NYSE as TSM, has seen its stock price rise materially, reaching beyond its last year’s highest mark of $321.59 on Monday. This climb extends the upward momentum that began towards the end of the previous trading week.
The price escalation followed the announcement that TSMC secured a one-year export license from the U.S. Department of Commerce. This license enables the company to continue importing American-manufactured chip fabrication equipment for use in its Nanjing facility in China without having to request individual vendor approvals for these shipments.
Specifically, the U.S. Department of Commerce’s approval applies to TSMC’s operations in Nanjing, facilitating uninterrupted deployment of U.S.-controlled tools essential for semiconductor manufacturing. This regulatory clearance removes significant operational obstacles, permitting the chipmaker to maintain its supply chain for crucial manufacturing equipment seamlessly.
At the close of trading on Friday, Taiwan Semiconductor’s American Depositary Receipts (ADRs) appreciated by 5.17% to $319.61, resulting in a market capitalization near $1.66 trillion according to New York stock data for the year’s first session. Over the preceding twelve months, the stock has risen by over 45%, reflecting heightened demand for its products, notably serving as a key supplier to tech giants Nvidia Corporation and Apple Inc.
This stock performance elevated TSMC into the sixth position globally by market capitalization, eclipsing firms such as Meta Platforms Inc. and Broadcom Inc., as noted by regional financial reports.
On the local stock exchange in Taipei, TSMC shares also surged, reaching a new peak price of 1,585 New Taiwanese dollars. Correspondingly, the company’s local market valuation expanded to approximately 41.1 trillion New Taiwanese dollars (approximately $1.31 trillion USD).
Nvidia Strengthens Taiwan Ties Amid AI Growth
The rising demand for artificial intelligence (AI) chips has placed additional demand on the semiconductor sector, strengthening Nvidia’s engagement with Taiwan. Nvidia’s CEO, Jensen Huang, is anticipated to visit Taiwan this month. Industry sources suggest Huang might announce plans to establish a new Nvidia headquarters in Taipei during this visit.
Local media report that Huang intends to engage with Taipei city officials and key industry stakeholders, highlighting Taiwan’s significant role in Nvidia’s AI development strategy. This visit coincides with Nvidia’s efforts to secure expanded production capacity of advanced chips from TSMC to address escalating market demand, particularly from Chinese technology companies.
Chinese firms have notably increased their orders for Nvidia's H200 AI chips, resulting in demand surpassing current supply levels. In response, Nvidia has requested TSMC to amplify production capacity to meet these orders.
Additionally, Huang’s visit is expected to include discussions with executives from major Taiwanese supply chain firms, such as TSMC, underscoring Taiwan’s ongoing strategic importance to Nvidia’s capability to ramp up AI hardware manufacture amid tightening global semiconductor capacity constraints.
Analyst Projections Reflect Confidence
Ahead of Taiwan Semiconductor’s forthcoming earnings announcement, Aletheia Capital has revised upward its revenue and earnings estimates for both the current and next fiscal years. Analyst Stefan Chang emphasizes that despite competition from cloud service providers developing proprietary chips, Advanced Micro Devices increasing market share, and Nvidia’s expanding footprint, the semiconductor space remains heavily reliant on TSMC's foundry services.
Aletheia Capital projects that TSMC’s revenue could more than double, with earnings potentially tripling, from 2024 through the following year. These growth expectations are underpinned by TSMC’s capability to expand production capacity and exercise pricing leverage in a market with robust demand.
Current Trading Overview
During the premarket session on Monday, Taiwan Semiconductor shares traded at $329.60, marking a 3.13% increase and setting a new 52-week high, as confirmed by professional market data platforms.
This performance reflects strong investor confidence in the company’s strategic positioning in the semiconductor industry and its ability to capitalize on emerging growth areas, particularly AI chip production.
Market Context
- TSMC’s stock appreciation is driven by both regulatory developments enabling smooth operational continuity and surging demand for AI-related semiconductors.
- The company’s dominant position in semiconductor manufacturing aligns closely with Nvidia’s expanding AI ambitions, strengthening their business relationship.
- Analysts anticipate significant revenue and earnings growth supported by capacity expansions and pricing strength.
Potential Risks and Uncertainties
- Although cloud providers are developing their own chips, and competitors like AMD are increasing market share, TSMC’s foundry remains pivotal, but these dynamics could influence its future market position.
- Geopolitical and regulatory environments surrounding the extension or renewal of U.S. export licenses could impact operational capabilities at TSMC's China facility.
- The capacity constraints within the semiconductor industry could affect TSMC’s ability to meet rapidly growing demand if expansion projects face delays or unforeseen challenges.
- Dependence on large customers such as Nvidia and Apple entails exposure to shifts in their respective demand or strategic directions.