At the beginning of the new year, the darling of the AI era has once again set a historical new high.

On January 6, Taiwan stocks' Taiwan Semiconductor rose by 4.65%, closing at 1,125 New Taiwan dollars, setting a historical new high, with a Market Cap rising to 29.17 trillion New Taiwan dollars.

US Stocks$Taiwan Semiconductor (TSM.US)$The opening saw a rise of over 3%, reaching a historic high, with a total market cap of 1.12 trillion US dollars.

Over the past year, the company’s stock price has continued to rise, and so far, Taiwan Semiconductor has accumulated a more than 100% increase in the U.S. stock market.

One of the biggest beneficiaries of AI.

Amid the wave of AI, the competition among global Technology giants in AI has accelerated, and the demand for AI Chips is still surging.

Recently, the tech giant Microsoft plans to invest $80 billion to build AI Datacenters for training AI models.

This move by Microsoft not only sets a record for the company's highest single investment but also indirectly highlights the huge demand for AI Chips.

In the past two years, chip giants led by NVIDIA have not only seen their stock prices soar but also enjoyed substantial profits.

Taiwan Semiconductor is also one of the beneficiaries of this wave of AI.

In the third quarter of FY2024, Taiwan Semiconductor reported revenue of NT$759.69 billion, with net income increasing by 54% year-on-year.

In October, Taiwan Semiconductor's revenue grew by 29.2% year-on-year, setting a new monthly record. In November, Taiwan Semiconductor continued to see strong sales growth, with revenue of approximately NT$276.058 billion, a 34% increase from the same period last year.

From January to November 2024, the cumulative revenue was approximately NT$2,616.145 billion, a 31.8% increase compared to the same period last year.

It is worth noting that Taiwan Semiconductor's next catalyst is the upcoming Earnings Reports and guidance.

On January 16th, Taiwan Semiconductor will hold the Earnings Conference for the fourth quarter of 2024.

It is estimated that Taiwan Semiconductor's sales for the fourth quarter will be between 26.1 billion USD and -26.9 billion USD, with a gross margin expected to be between 57% and 59%.

The buzz on Wall Street is high.

In the advanced chip manufacturing field, Taiwan Semiconductor almost encompasses all the major players.

Over the years, Apple, NVIDIA, Broadcom, Qualcomm, and others have been major clients of Taiwan Semiconductor.

Among them, Apple accounts for about 25.2% of Taiwan Semiconductor's annual revenue, continuing to hold the top position; NVIDIA has surged to the second position due to the AI explosion, with a contribution rate of about 10.1%.

Currently, Global AI is booming, and even though Taiwan Semiconductor has proactively deployed and continues to invest 20-30 billion dollars each year to build and expand factories, supply still cannot meet demand.

It is said that in 2025, Taiwan Semiconductor will launch 2nm chips, which is expected to provide strong upward momentum for Taiwan Semiconductor.

Morgan Stanley expects that Taiwan Semiconductor's performance guidance for full-year 2025 revenue growth will be between 20% and 30%, maintaining a "Buy" rating and giving a target price of 1388 New Taiwan Dollars.

MORGAN STANLEY predicts that Taiwan Semiconductor's gross margin in 2025 will be above 53%, with capital expenditure at 38 billion dollars.

Goldman Sachs also anticipates that Taiwan Semiconductor's revenue growth this year will be steady, expected to rise 26.8% year-on-year (in US dollars), compared to last year's revenue growth of 29.4%, primarily benefiting from strong demand in advanced process nodes, especially the continuing robust momentum in the AI field.

At the same time, the firm believes that the competitive environment for Taiwan Semiconductor is more favorable, as Samsung and Intel face more difficulties transitioning to advanced process nodes, therefore, it is expected that starting this year, the prices of 3nm and 5nm chip nodes will increase in the mid-high single digits, while the price of advanced packaging technology (CoWoS) may rise by 10%.

Against the backdrop of rising prices, the firm estimates that Taiwan Semiconductor's gross margin will rise to 59.3% this year, compared to 56.1% last year.

In addition, Goldman Sachs expects that Taiwan Semiconductor will very likely revise upward its forecasts for profit prospects and long-term revenue compound annual growth rate during next week's Earnings Conference. It will also adjust its earnings per share forecasts for this year and next year upward by 4.3% and 2.6%, respectively, raising its target price from 248 dollars to 254 dollars, reiterating its "Buy" rating and continuing to include it on the "Conviction Buy" list.

Citi has stated that in 2025, as NVIDIA may become Taiwan Semiconductor's largest or second-largest customer and contribute 20% of revenue, Taiwan Semiconductor's AI-related income may increase significantly.

In addition to NVIDIA, the development momentum of custom AI Chips (ASIC) in the next two to three years may also support Taiwan Semiconductor's Business.

Citi expects Taiwan Semiconductor's revenue growth rate to reach 20%-25% in 2025, with gross margin reaching a high of 50%.

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