Could Taiwan Semiconductor (NYSE:TSM) be an unexpected winner of the fast-emerging generative artificial intelligence (AI) trend? At least one analyst group seems to think so, and they’re setting an ambitious price objective for TSM stock.
Taiwan Semiconductor (TSMC) probably isn’t the first company mentioned in a typical discussion about machine learning. Yet, Bank of America analyst Brad Lin sees Taiwan Semiconductor as a “key beneficiary” and a top-20 global AI stock pick.
Lin cited the “rising and widening applications of large language models (LLMs) and generative AI,” led by OpenAI’s ChatGPT chatbot platform. ChatGPT thrust OpenAI investor Microsoft (NASDAQ:MSFT) into the financial headlines this year. However, Microsoft won’t be the only business to generate revenue from machine-learning applications.
TSMC may be well-positioned to supply some of the tech components needed to run generative AI applications. Thus, Lin expects generative AI to “act as one of the greatest drivers, thanks to the substantial computational requirements for running and training the AI models.”
What’s Happening With TSM Stock?
Given Lin’s optimistic remarks, one might assume that TSM stock would be firmly in the green this morning. However, shares were actually down 0.5% as of 10:30 a.m. Eastern today.
The Bank of America analysts raised their price target on TSM stock from $105 to $115. If shares are currently trading at around $90, then Lin’s price objective implies a nearly 28% upside potential. So, today’s response (or lack thereof) from financial traders is somewhat surprising.
In support of this ambitious price target, Lin posited that TSMC would ride the “structural uptrend” he sees with opportunities in generative AI. This, therefore, should drive demand for certain types of semiconductors.
Lin deployed some notable statistics to help connect the dots between generative AI and TSMC’s product offerings. “Datacenter (including supercomputing) related revenue currently accounts for ~10% of the revenue,” the Bank of America analyst observed.
Furthermore, the analyst group estimates that “CPU/GPU/accelerator upside for generative AI could potentially contribute 1%-2% initially and likely up to 8% in a bull case.” So, if Lin is right, Taiwan Semiconductor could accrue bottom-line benefits from the machine learning movement. This may prompt some share-price appreciation, sooner or later, in TSM stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.