Why Taiwan Semiconductor Stock Topped the Market Today

For the most part, Monday was a rather forgettable day for the stock market. The S&P 500 index could only muster a 0.1% gain, and many titles traded sideways during the session. So the more than 1% gain of chipmaking giant Taiwan Semiconductor Manufacturing (TSM 1.54%) to a new, all-time high share price was notable.

The long-tail trend is its friend

That day, Taiwan Semiconductor benefited from a long-tail trend, combined with a little adrenaline boost from an analyst.

The trend is the gnawing investor hunger for companies involved in the development of artificial intelligence (AI), and the high-profile chip maker is front and center of this. It is busy selling current-generation processors that can handle AI functionalities, and developing new products with more computing power.

Meanwhile, on the first day of the trading week, influential white shoe investment bank Morgan Stanley raised its price target on Taiwan Semiconductor. The bank now feels that its shares are worth $1,180 Taiwanese dollars ($36.39) apiece, up slightly from the previous estimation of $1,080 ($39.31).

Double-digit growth in the cards

In Morgan Stanley’s latest Taiwan Semiconductor research note, the company’s analysts forecast that the specialty tech giant would raise its full-year revenue guidance to growth of 25% year over year compared to 2023. It almost goes without saying at this point that much of this would be fueled by demand for chips that can handle AI operations.

Morgan Stanley also believes that the Asian company will be able to navigate current supply constraints, partially by imposing modest (3% to 4%) price increases on customers.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.