Key Apple Supplier's Stock Gets 14 Upgrades In 2 Weeks Amid Soaring Demand: What's Going On?

The Taiwanese chip manufacturer Taiwan Semiconductor Manufacturing Company TSM has seen a surge in analyst upgrades. This comes as the demand for artificial intelligence chips continues to rise.

What Happened: As many as 14 analysts have upgraded TSMC in the past two weeks, reported CNBC. The company’s stock has witnessed a 35% increase since the start of the year and a 60% rise over the past year.

"TSMC's shares remain attractive, as artificial intelligence-related demand continues to pleasantly surprise us, and there is limited downside to sentiment for the automotive and industrial markets," said Phelix Lee, equity analyst at Morningstar

TSMC is the world’s leading producer of advanced processors, with a significant portion of its business driven by the AI sector. The company’s recent financial results, which exceeded revenue and profit expectations, have further bolstered its position.

“Without access to leading edge equipment, China has to order more legacy equipment to keep up with the West. This "inefficiency" has been estimated to likely create an additional ~10% in equipment demand over time," said Dan Kim, senior investment analyst at Saturna Capital.

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The recent upgrades are attributed to the strong demand for advanced chips, especially those used in AI applications. Analysts are optimistic about TSMC’s future prospects, citing factors such as its disciplined approach to capital spending and the unexpected speed of AI server orders.

Why It Matters: The surge in TSMC’s stock and the high demand for advanced chips are in line with the global trend of increasing AI technology. Major chip manufacturers are facing shortages due to the exponential demand for AI technology, a situation that is expected to persist through 2024 and into 2025.

China’s aggressive investment in semiconductor technology is also a significant factor in the global chip race. The U.S. and China are set to discuss the risks of advanced AI in Geneva, highlighting the strategic importance of AI technology in the ongoing geopolitical competition.

Analysts have also predicted a 50% increase in NVIDIA Corp‘s NVDA stock due to its strong pricing power and AI roadmap, further underlining the growing significance of AI technology in the semiconductor industry.

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