In the world of semiconductor stocks, Taiwan Semiconductor (NYSE:TSM) remains a top stock investors continue to focus on. There are many reasons for the 64% move in TSM stock on a year-to-date basis. But it’s clear that overall chip demand has outpaced even the most bullish expectations heading into 2024.
As a top chip manufacturer that makes wafers, semiconductors, and components and ultimately puts chips together for larger players, Taiwan Semi is often viewed as a bellwether for the overall space. Accordingly, when the company reports that its revenue surged 45% during July on strong demand, it’s understandable that TSM stock would surge roughly 1.5% on this news and take most chip stocks higher in concert.
The extent of this beat was impressive, with the company beating sales expectations and analysts upping their growth targets. On a forward-looking basis, analysts expect Taiwan Semi to continue growing in the 37% range.
Let’s dive into what to make of these numbers and what the artificial intelligence (AI) trend may mean for TSM stock moving forward.
TSM Stock Surges on Reports of Stronger Than Expected AI Demand
The rise of AI technology and the inherent demands it places on chip manufacturers are key drivers of Taiwan Semi’s move thus far this year. The U.S.-listed ADR is seeing strong share price appreciation as investors and analysts are consistently forced to increase their forward growth expectations. Doing so lowers the company’s forward multiple and makes it cheaper on a relative basis.
In my view, today’s move in TSM stock is a relatively muted one, given the strength of these July numbers. If these July numbers are correct, and this strong demand continues into August, the company’s fiscal Q3 report could be impressive. Indeed, these real-time indicators are helpful for investors looking to gauge whether this stock, or any stock for that matter, is valued correctly at a given point in time.
So long as the demand for AI chips remains strong, Taiwan Semi should be a key beneficiary of these trends. Accordingly, this is a so-called picks-and-shovels play in the chip sector that may garner even more attention moving forward.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a LONG position in TSM.
