Source: Zhitong Finance "Since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%)." With the rebound of the stock market, the old adage "Sell in May and Go Away" seems to have been a bad advice once again. Last month, the S&P 500 index rose 4.8%, the best May performance since 2009. The NASDAQ 100 index rose nearly 6.2%, and the NASDAQ Composite Index rose 6.9%. Goldman Sachs FICC & Equities Trading Division said: "History doesn't really support this saying. Don't sell, leave the market (go on vacation), and enjoy the good times." The rising trend is still to be continued? If history is any guide, it may indicate that the rise of the stock market is not over yet. Looking ahead to the rest of 2024, Scott Rubner, Managing Director of the Goldman Sachs Global Markets Division and tactical expert, pointed out the following historical background for investors. Rubner stated that the S&P 500 index has risen 10.7% year-to-date, and since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%). "Since 1950, the median return of the last 7 months of each year (June 1 to December 31) is 5.4%. In the aforementioned 21 cases, the average performance of the last 7 months increased to 8.1%." Rubner added. Rubner also pointed out that the NASDAQ index has risen for 16 consecutive Julys, with an average return of about 4.64%.

The top chip manufacturer with the title of "chip foundry king" in the world.$Taiwan Semiconductor (TSM.US)$The stock price has recently shown a skyrocketing trend, accelerating its total market value towards the $1 trillion threshold. Whether in Taiwan's stock market or TSMC's ADR on the US stock market, the recent rapid rise in prices has even made it difficult for the 'buy low' crowd to find an entry point. The call to bullish on TSMC's stock price from Wall Street analysts has become increasingly high, and even some analysts who are extremely optimistic about TSMC's future market outlook believe that TSMC's market value may only be a matter of time until it is on par with Nvidia, which currently has a market value of up to $3 trillion.

Calculated using the American Depository Receipt (ADR) price of TSMC, a company listed in the United States, TSMC's total market value surpassed that of Warren Buffett's Berkshire Hathaway Inc. last week, making it the eighth largest listed company in the world. Since the beginning of this year, TSMC's ADR has seen an astonishing increase of 73%, resulting in a total market value of $932 billion when evaluated at the ADR trading price, moving closer and closer to the $1 trillion market value threshold.

The reason why TSMC's ADR has outperformed TSMC's shares in Taiwan lies in the fact that international investors find it easier to invest in ADRs. TSMC's ADR is included in heavyweight indexes related to semiconductor stocks such as the PHLX Semiconductor Index, as well as in popular semiconductor ETF products worldwide such as the VanEck Semiconductor ETF and iShares Semiconductor ETF, where it has a high weightage. This means that funds and semiconductor ETFs that track the PHLX Semiconductor Index and other indexes must continuously buy TSMC's ADRs listed in the United States.

As the unquestioned leader in the semiconductor foundry industry, TSMC is currently at the core of the global craze for artificial intelligence and chip manufacturing. Its most advanced chip-making technology, as well as its relatively low valuation compared to other tech giants such as Nvidia, have made it one of the most popular chip stocks among global investors. The core logic lies in the fact that TSMC is the sole manufacturer of high-performance AI GPUs such as Nvidia's H100/H200/GB200, while Nvidia is currently the highest valued listed company in the world.

As the undisputed leader in the semiconductor foundry industry, TSMC, which has the title of 'King of Global Semiconductor Foundries', is currently at the core of the global craze for artificial intelligence and chip manufacturing. As the sole manufacturer of Nvidia's AI GPUs globally, TSMC is capable of controlling Nvidia's production capacity virtually single-handedly. Nvidia, on the other hand, is the absolute leader in the global AI chip market, holding a market share of as high as 80-90%.

New statistics show that TSMC's sales in May increased significantly by 30% year-on-year to NT$ 229.6 billion (approximately $7.1 billion), mainly due to the rampant craze of global companies deploying AI technology and the growing trend of recovery in demand for consumer electronics products such as PCs and smartphones.

If we look at a broader time frame, in the five months from January to May 2024, TSMC's total sales volume reached an astonishing NT$ 1.058 trillion, which represents a significant increase of 27.2% compared to the already strong sales volume in the same period last year. Since 2024, various AI applications such as ChatGPT and Sora have exploded in demand, driving the construction boom of global AI data centers and stimulating an explosive increase in demand for AI chips such as Nvidia's AI GPUs and server AI chips produced by TSMC.

In addition, according to media reports, TSMC's 3nm chip manufacturing cost has increased by more than 5%, and the cost of TSMC's chiplet advanced packaging is expected to increase by 10%-20% next year. At the shareholders' meeting on June 4, the newly appointed chairman and CEO of TSMC, Wei Chih-chung, openly expressed his thoughts on price increases for TSMC's products and revealed that almost all AI chips on the market are made by TSMC.

With its world-class chip-making technology and advanced chiplet packaging technique, Taiwan Semiconductor is about to enjoy this powerful catalyst of AI boom.

As large global enterprises invest heavily in building AI data centers, the demand for AI chips has surged. Thanks to its unique contract manufacturing position in the high-end process field below 5nm and, in particular, its top-notch Chiplet advanced packaging technology, Taiwan's TSMC has been able to maintain high profit margins. In terms of product structure, products with revenues of 10-30 billion yuan respectively generated 401/1288/60 million yuan in operating income.

In the current context of surging demand for AI chips, Taiwan Semiconductor is bound to continue to benefit as the global leader in AI chips, NVIDIA, and as the sole foundry for AMD AI chips, as well as a foundry for cloud giants such as Microsoft and Amazon. With the world's most advanced chip-making technology and the most advanced Chiplet advanced packaging technology, Taiwan Semiconductor, the foundry king, may have reached the "NVIDIA moment" when share prices and performance soar in sync.

In addition, Samsung also faces chip contract manufacturing challenges from Intel, which is continuously opening large-scale chip contract manufacturing factories to accelerate its entry into the contract manufacturing field, trying to win chip-driven orders from chip companies such as Nvidia and AMD.

With decades of experience in chip manufacturing technology and long-term commitment to technological innovation and improvement, TSMC has been at the forefront of the chip manufacturing industry, leading with advanced processes and packaging technologies for global chip makers, as well as high yield, and has long dominated the orders for most of the world's chip contract manufacturing, especially for chips with advanced processes of 5nm and below. According to analysts on Wall Street, starting in the second half of 2024, 3nm and below advanced processes will continue to generate significant revenue for TSMC due to the demand for NVIDIA's GB200 and AMD's new MI325 series. The price increase in 3nm and below processes and advanced packaging contract manufacturing is expected to accelerate revenue growth in 2025 and subsequent years.

Research firm Gartner predicts that the development of generative AI and LLM will push the deployment of high-performance servers based on AI chips in data centers. The firm expects the global revenue from AI chips to reach around $71 billion by 2024, up 33% from 2023. It is expected to reach $92 billion by 2025. Citigroup expects AMD's flagship AI chip MI300X to hold about 10% of the market share in 2024 when demand for 3nm and below advanced processes and advanced packaging contract manufacturing prices are expected to continue to rise. TSMC is also the exclusive contract manufacturer for AMD's chips. These all show the unparalleled importance of TSMC in providing contract manufacturing services for top chip companies.

What's more, TSMC currently dominates virtually all of the high-end chip packaging orders for chips with processes of 5nm and below in the market with its leading 2.5D/3D chiplet advanced packaging technology. The supply of advanced packaging capacity is far from meeting demand. NVIDIA's H100/H200 products are in short supply because they are limited by TSMC's 2.5D CoWoS packaging capacity. According to some media reports, based on TSMC's 3nm, 4nm and 5nm processes, advanced packaging capacity for chiplet is now fully loaded due to a huge number of orders for NVIDIA's H100/H200 and B200/GB200, AMD's MI300 series, Broadcom's Ethernet chips, and Microsoft and Meta's self-developed AI chips.

Markets and Markets' latest research shows that the total market size of advanced packaging products and technologies for chiplets covering GPUs, CPUs, FPGAs and other chips (2.5D/3D, SiP, WLCSP, FCBGA and Fan-Out) is expected to reach about $148 billion by 2028, with a staggering CAGR of 86.7%. According to the firm's estimates, the total market value of chiplets could be as low as $6.5 billion in 2023.

Goldman Sachs and other Wall Street giants strongly believe in TSMC's future prospects.

Top Wall Street investment banks have raised their target prices for TSMC this week. The core logic is the surge in demand for AI chips brought on by artificial intelligence, and the significant price increase in 3nm technology and advanced packaging contract manufacturing that may appear in 2025 is expected to significantly boost the company's performance and valuation. Among them, Goldman Sachs, the Wall Street giant, raised its 12-month target price for TSMC's Taiwan shares by 19% to NT$1,160 (Taiwan shares closed at NT$981 on Wednesday). Citigroup expects TSMC's revenue growth to reach 39% and 31% year-on-year in 2025 and 2026, respectively, under the strong demand for AI chips. It is expected to grow by 29% in 2024.

Some analysts who are extremely bullish on TSMC's future prospects believe that TSMC, which single-handedly controls NVIDIA's production capacity, will eventually equal NVIDIA in market capitalization, which currently stands at an astounding $30 trillion. In terms of American depositary receipts (ADRs), Susquehanna, a well-known institution on Wall Street, is predicting a significant increase in TSMC's ADR price to $200, meaning that TSMC's highly valued ADR still has a nearly 12% increase potential.

Analysts from another Wall Street giant, JPMorgan, have raised their expected AI-related revenue for TSMC to 35% of total revenue by 2028. JPMorgan pointed out that TSMC has an almost monopolistic position in the chip manufacturing end of cloud computing and edge AI-related chips, with AI-related revenue expected to account for around 35% of total revenue by 2028 (with cloud services accounting for 28% and edge AI accounting for 7%). JPMorgan has raised TSMC's target price from NT$900 to NT$1,080 and maintained an "overweight" rating.

In its latest research report, Citigroup has revised up its target stock price for TSMC to NT$1,150, far above the current TSMC Taiwan stock price of NT$1,030. Citigroup expects TSMC to fully benefit from the strong demand for chips in data centers and edge AI, especially in more advanced 3nm and 2nm or lower chip manufacturing processes, as rapidly developing large AI models are applied more widely. Citigroup expects the average contract price for advanced manufacturing processes (i.e., processes below 5nm) to rise 5% to 10% by 2025.

Citigroup expects that by the end of 2025, the majority of AI accelerators for most global servers, including NVIDIA's new AI GPU, will migrate to 3nm processes or even some may try TSMC's more expensive 2nm or 1.8nm processes, which will bring larger orders for TSMC. It is expected that TSMC's 3nm chip manufacturing process utilization rate will remain in short supply, at least into 2025. Citigroup expects TSMC's average contract price for advanced manufacturing processes (i.e., processes below 5nm) to rise by 5%-10% in 2025.

Goldman Sachs analysts predict that Taiwan Semiconductor's 3nm and 5nm chip manufacturing prices will both increase in the 'single-digit percentage,' and raise its 12-month target price to NT$ 1160, an increase of 19%. Including analysts such as Bruce Lu, Goldman Sachs analysts wrote in a report on Tuesday, 'We now see that as the positive sentiment around artificial intelligence grows, the risk-return of Taiwan Semiconductor is very attractive.' 'As the scale of artificial intelligence applications continues to expand, we believe that Taiwan Semiconductor is one of the most core beneficiaries.'

Editor/Lambor