(Bloomberg) — Taiwan Semiconductor Manufacturing Co.’s surge has pushed the company to its most overbought level in three years, but investors are giving up on the gains given the company’s key role in artificial intelligence. It has been suggested that the decision may be made too early.
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TSMC, whose chips are used in some of the world's most advanced AI processors, gained further momentum this week by rising more than 10% to a new record following a breakthrough from client Nvidia. This rally has resulted in 14-day relative strength for the index, which is above 82, making it one of the most overbought stocks in Asia based on this technical indicator.
“Consumer and business confidence in GenAI's added value justifies the potential for price increases,” said Charles Shum, an analyst at Bloomberg Intelligence. The company's next reassessment will be driven by the rapid growth in generative AI used in devices such as smartphones and computers, he added.
The world's top chip foundry soared as much as 4.6 percent to NT$769 in Taipei on Thursday. Other Taiwanese chip makers also rose slightly, with MediaTek closing 3.4% higher and ASE Technology Holding rising 9.7% to a new record.
JPMorgan Chase & Co. on Wednesday raised its price target on TSMC by 10%, calling the stock “an enabler for nearly all AI processing in the data center and at the edge.” AI-related revenue should jump by a quarter by 2027, and the company should maintain its lead in developing some advanced chips, analysts including Gokul Hariharan wrote in a note.
TSMC has climbed nearly 30% this year, riding the market's obsession with generative AI, driven by Nvidia's earnings. The company plans to report its monthly sales figures on Friday.
(Add other chip manufacturers' market share results in the fourth paragraph.)
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