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In the world of semiconductor stocks, Taiwan Semiconductor (NYSE:TSM) continues to be a top name for investors to watch. There are many reasons why TSM shares have risen 64% year to date, but it’s clear that overall semiconductor demand heading into 2024 is outperforming even the most bullish expectations.
Taiwan Semiconductor is often seen as a bellwether for the industry as a top chipmaker that makes wafers, semiconductors, components and ultimately assembles chips for major companies. So when the company reported that its July revenue rose 45% on rising demand, it was no surprise to see TSM shares rise about 1.5% on the news, with most chip stocks rising in unison.
This better-than-expected performance was impressive, as the company beat revenue expectations and analysts raised their growth targets. Looking forward, analysts expect Taiwan Semiconductor to continue growing at a rate of around 37%.
How to interpret these numbers and artificial intelligence (artificial intelligence) trends, how will they impact future movements of TSM stock?
TSM shares surge after reports of better-than-expected AI demand
The rise of AI technology and the unique demands it places on chipmakers has been the primary driver of Taiwan Semiconductor’s performance so far this year. Its U.S.-listed ADRs have seen their shares soar as investors and analysts continually push up their future growth expectations. This has pushed the company’s forward price multiple lower, making it cheaper in comparison.
In my view, TSM stock’s move today is relatively modest given the strength of the July numbers. If the July numbers hold true and this strong demand continues into August, the company’s third quarter earnings report will be impressive. Indeed, these real-time metrics can be helpful for investors trying to determine whether this stock, or any other stock, is correctly valued at a given point in time.
As long as demand for AI chips remains strong, Taiwan Semiconductor will benefit from these trends, so this is a “pick and shovel” move in the chip space that may become even more popular in the future.
As of the date of publication, Chris McDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author in accordance with InvestorPlace.com’s publishing guidelines.
As of the publication date, the editor held a long position in TSM.
