Investors keen on tapping into the burgeoning artificial intelligence (AI) landscape may find Taiwan Semiconductor Manufacturing (TSMC) to be a promising avenue, suggests analyst Gokul Hariharan of JPMorgan. With its strategic positioning and robust growth prospects, TSMC emerges as a compelling choice in the semiconductor space.
The Endorsement from Analyst Gokul Hariharan
Reiterating an overweight rating on TSMC, Hariharan underscores the company’s pivotal role as a supplier to major chip players like Nvidia, Advanced Micro Devices (AMD), and Qualcomm. He emphasizes that TSMC stands at the forefront of the AI semiconductor domain, asserting that “all roads in AI semis lead” to the company.
TSMC’s Competitive Advantage in the AI Semiconductor Market
Hariharan highlights TSMC’s compelling valuation, noting that it remains one of the most attractively priced large-cap semiconductor stocks globally. He points out that TSMC is trading at approximately a 30% discount to the SOX index and a significant 51% discount to the large-cap AI semiconductors basket, comprising Nvidia, AMD, Broadcom, and Marvell. This discount, he believes, will likely narrow as TSMC solidifies its position as a key enabler of AI technology.
Growth Trajectory and Market Dominance
Over the next three to four years, Hariharan anticipates TSMC to maintain its dominant market share of over 90% in AI-connected processor silicon. This market stronghold is expected to propel TSMC’s AI-related revenue contribution from 6% in 2023 to a substantial 27% by 2027, nearly quadrupling its current share.
Revenue Projections and Catalysts
Buoyed by the burgeoning demand for high-performance computing driven by AI training and inference, Hariharan forecasts TSMC’s revenues to reach an impressive $119 billion by 2026. He underscores the significance of TSMC’s 3 nanometer process technology, particularly in catering to chipmakers like Nvidia, which is poised to fuel revenue growth further.
Expanding Moat and Technological Advancements
Hariharan accentuates TSMC’s widening moat in the AI semiconductor arena, attributing it to the company’s leadership in process technology, integrated packaging methods, and robust support from the broadest IP and design service ecosystem in the semiconductor industry.
TSM Technical Analysis
Starting with the candlestick chart at the top, we see TSM’s stock price appears to have experienced a significant uptick followed by a corrective phase, but above its 50-day moving average and well above the 200-day moving average, indicating a potential short-term bearish signal within a longer-term bullish trend.
Volume, presented at the bottom of the top chart, shows considerable trading activity on certain days, which can often coincide with significant price movements.
The Relative Strength IndexIn the world of technical analysis, the Relative Strength Index (RSI) stands as a cornerstone tool for traders seeking insights into market momentum. Developed by J. Welles Wilder ... (RSI) is around 51, which suggests the stock is neither overbought nor oversold.
The On Balance VolumeThe On Balance Volume indicator (OBV) is a technical analysis tool used to measure the flow of money into and out of a security over a specified period of time. It is a cumulative ... (OBV) is trending upwards, which typically indicates bullish sentiment as volume is higher on up days than down days.
The Stochastic RSIIn the realm of technical analysis, the Stochastic RSI (StochRSI) emerges as a powerful tool for traders seeking to navigate market dynamics with precision. Developed by Tushar S. ... is currently at 0, showing that the stock has been oversold in the short term.
The Average Directional IndexThe Average Directional Index (ADX) stands as a cornerstone indicator in the toolkit of technical traders, offering insights into the strength of market trends. Developed by Welles... (ADX) reads approximately 34, suggesting a strong trend; the value over 25 indicates a stronger trend presence.
Finally, the Chaikin OscillatorNamed after its creator Marc Chaikin, the Chaikin Oscillator stands as a formidable tool in the arsenal of technical analysts. This oscillator is designed to measure the accumulati... is negative, which may indicate selling pressure or distribution.
In conclusion, TSMC emerges as a compelling investment opportunity for investors seeking exposure to the burgeoning AI semiconductor market. With its strategic positioning, technological prowess, and robust growth trajectory, TSMC stands poised to capitalize on the transformative potential of artificial intelligence, making it a solid bet for discerning investors looking to ride the AI boom.
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This content is provided for informational purposes only and does not constitute financial, investment, tax or legal advice or a recommendation to buy any security or other financial asset. The content is general in nature and does not reflect any individual’s unique personal circumstances. The above content might not be suitable for your particular circumstances. Before making any financial decisions, you should strongly consider seeking advice from your own financial or investment advisor.
