TSM Soars Past Berkshire, Nears $1 Trillion Valuation
Last week, $Taiwan Semiconductor Manufacturing(TSM)$ , the world's largest chipmaker, surpassed $Berkshire Hathaway(BRK.B)$ $Berkshire Hathaway(BRK.A)$ in market value, becoming the 8th largest company globally.
TSM's US-listed ADRs have risen 73% this year, pushing its market capitalisation to $932 billion, close to the round figure of $1 trillion.
Wall Street Brokers Bullish
This week, Wall Street brokers are all hyping up TSM's stock price, saying that soaring AI demand and potential price hikes will drive the company's earnings growth through the roof by 2025.
$Goldman Sachs(GS)$ , among these brokers, is the most bullish, hiking their target price by 19% to NT$1,160. They even predict that the cost of manufacturing 3-nanometer and 5-nanometer chips will increase by only a low single-digit percentage.
$JPMorgan Chase(JPM)$ says TSM might raise its 2024 revenue forecast, with capital expenditures potentially reaching the upper end of the guidance range. They also expect AI to account for 35% of total sales by 2028.
Moreover, $Citigroup(C)$ and $Morgan Stanley(MS)$ have also increased their target prices, citing a positive earnings outlook.
A major beneficiary of the AI revolution
TSM, with its cutting-edge chip-making technology, is a major beneficiary of the AI revolution. In addition, it's a key supplier of high-end chips to $NVIDIA Corp(NVDA)$ , which just became the world's largest company by market cap.
Goldman analysts like Bruce Lu said on Tuesday that with the ever-growing enthusiasm for AI, TSM's risk-reward ratio is becoming increasingly appealing.
Revenue Growth
TSM's revenue has been accelerating this year. In 2023, its revenue and adjusted earnings declined by 9% and 21%, but 2024 is a whole new ballgame. TSM recently reported a 30% year-on-year increase in May's revenue, and a 27% growth for the first five months of the year, surpassing analysts' expectations of a 23% revenue growth in 2024.
According to SIA's predictions, global semiconductor sales are expected to grow 16% this year, and TSM's growth rate so far this year is above the industry average, indicating that the company's market share in third-party chip contract manufacturing is still rising. TSM currently holds a whopping 61% market share, far ahead of Samsung's 11%.
TSM's current price-to-sales ratio is around 12. At this valuation, assuming the company's 2024 revenue reaches $85 billion, its market value would increase by 10% and surpass the trillion-dollar mark.
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