On Monday, BofA Securities adjusted its outlook on Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM), increasing the stock's price target to $880 from the previous $760. The firm maintained a Buy rating on the shares, citing expectations of sustained demand for advanced semiconductor nodes. The optimism is driven by the growing strength of artificial intelligence (AI), computing power requirements, and energy efficiency needs.
The assessment by BofA Securities highlights that TSMC's leadership position in the semiconductor industry is likely to be further solidified by Intel (NASDAQ:INTC)'s recent decision to outsource production of certain CPU tiles for its Lunar and Arrow Lake processors to the company. This strategic move is anticipated to contribute positively to TSMC's business and reinforce its industry dominance.
TSMC's stock has experienced a notable increase, rising 27% year-to-date, which the analyst attributes to the robust AI sector and a broader industry recovery. Despite this growth, TSMC's forward price-to-earnings (P/E) ratio has not kept pace with the Philadelphia Semiconductor Index (SOX) since 2020, particularly underperforming in the second half of 2023 through the year-to-date period of 2024.
The firm suggests that TSMC's valuation is poised for a reassessment and is deserving of an upgrade, considering the company's critical role in the era of AI. The upgraded price target reflects confidence in TSMC's future performance and the anticipated demand for its advanced semiconductor technology.
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