TSMC Becomes Top Morgan Stanley A.I. Stock – Shares Surge & Set New Record

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With the first quarter of 2024 reaching its end, not only have the shares of the Taiwan Semiconductor Manufacturing Company (TSMC) set new all time high records in Taiwanese markets, but investment bank Morgan Stanley is also out with another bullish note for the stock. TSMC’s stock, like the shares of NVIDIA Corporation, has done well this year because of the hype surrounding artificial intelligence products.

The Taiwanese firm plays a crucial role in the global semiconductor supply chain with its advanced chip manufacturing processes, and the recent share price surge builds on the optimism surrounding the stock after management shared during TSMC’s latest earnings that it believed that the company was well positioned to capture any chip demand from A.I. use cases.

Morgan Stanley Sets Four Digit Best Case Share Price Target For TSMC’s Shares

As part of the latest analyst note covering TSMC’s shares trading in Taiwan, Morgan Stanley’s base case price target for the firm is NT850 and the best case price target is $1080. The latter marks the first time since 2021 that a four digit share price target has been set for TSMC’s shares, and according to the UDN, artificial intelligence is naturally at the heart of the optimism.

Morgan Stanley’s previous TSMC share price target for the base case scenario was NT$758, making today’s upgrade a sizable 12.1% bump. According to the bank’s analysts, TSMC can more than double its A.I. chip output this year, which can contribute to revenue growing by 25% in 2024.

The Taiwanese fab, like the broader chip industry, struggled in 2022 and 2023 to maintain a growth trajectory, particularly if we discount the impact of A.I. product demand on revenue. Morgan Stanley adds that TSMC’s revenue could grow by an additional 20% in 2025.

A weak chip market gutted TSMC’s free cash flow in the second quarter of 2023 as the firm generated far less cash from selling its products. Image: TSMC

This didn’t mark the end of Morgan Stanley’s optimism for TSMC, though, as it also revealed that TSMC is now Morgan Stanley’s preferred stock – replacing the Taiwanese consumer electronics firm MediaTek. The bank’s best case scenario price target for TSMC is NT1,080 and it is based on the firm’s ability to integrate and advance extreme ultraviolet (EUV) chip manufacturing technologies in its process flow.

According to Morgan Stanley, favorable deployment of EUV can lead to Intel outsourcing more of its orders to TSMC. Intel CEO Patric Gelsinger made headlines late last month when he shared that some of the firm’s next generation chip designs such as Lunar and Arrow Lake will use a variant of TSMC’s 3-nanometer, or N3 process.

Morgan Stanley’s hypothesis for the NT1,080 share price target is based on Intel outsourcing its production to TSMC sooner than expected, with the newer technology also leading to a cost reduction to booster overall earnings. The analysts add that most of TSMC’s future revenue growth should rely on A.I. chips, and U.S. investors find the Taiwanese firm’s shares favorable because of the A.I. contributions, a robust global fabrication base and more chip designers seeking to make their A.I. chips. All these put together have made the analysts comment that they are “optimistic about the company‘s long-term growth and pricing ability.

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