On Wednesday, BofA Securities updated its outlook on Taiwan Semiconductor Manufacturing Co. Ltd. (2330:TT) (NYSE: TSM), increasing the price target to NT$1,040.00 from NT$920.00 and reaffirming a Buy rating.
The adjustment follows Apple's announcement at the Worldwide Developers Conference (WWDC) on Tuesday and the positive insights from 2024 Computex. The analyst cited the growing demand for semiconductor content as aligning with their previous analyses on on-device AI, deeming TSMC a principal beneficiary and facilitator of AI advancement.
The firm has adjusted its earnings estimates for TSMC upwards by 1-3% for the years 2024 to 2026, attributing this change to anticipated stronger demand for AI and a more favorable average selling price (ASP) outlook. This new price objective reflects a higher price-to-earnings (P/E) ratio of 20 times, increased from 18 times, to account for these factors.
Apple, which constitutes 25% of TSMC's revenue, is seen as a significant driver of this growth due to its substantial semiconductor needs.
The report highlighted two main factors that are expected to boost TSMC's revenue: the increased system-on-chip (SOC) content required for local processing of tasks for privacy reasons, which is currently only manageable by the A17 Pro and M-series chips, and Apple's Private Cloud Compute initiative, which relies on dedicated servers using Apple Silicon to enhance user privacy.
The strong demand for TSM's advanced 3nm semiconductors in the first half of 2024, despite it traditionally being a low season, is seen as a testament to this growing need.
The analyst also pointed out that Apple's expanding AI services could further increase semiconductor demand from what is currently a relatively low base. As the supplier of A- and M-series semiconductors for Apple, TSMC is well-positioned to capitalize on this multi-year growth trajectory.
In other recent news, Apple Inc. has made significant strides in the business world. The tech giant has achieved a brand value exceeding $1 trillion, marking a 15% increase from the previous year, as confirmed by Kantar's BrandZ global ranking.
In a major move to enhance its voice assistant Siri, Apple has partnered with OpenAI and has been utilizing Google (NASDAQ:GOOGL)'s AI technology. This partnership underscores Apple's commitment to advancing its AI capabilities. In the realm of analyst ratings, Apple shares (NASDAQ:AAPL) have been upgraded from Sell to Neutral by Lightshed Partners, reflecting the firm's recognition of the rapid integration of AI across the industry.
However, Apple is also facing an expanded antitrust lawsuit, with four additional states joining the legal action alleging the tech giant has monopolized the smartphone market.
Meanwhile, KeyBanc maintained its Sector Weight rating on Apple after the recent Worldwide Developers Conference, suggesting that the event may not significantly impact consumer behavior. These are some of the recent developments surrounding Apple Inc.
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