AI craze accelerates expansion of trillion-dollar club

Just over a year ago, a company that was then almost unknown to the general public managed to break the trillion-dollar market capitalization barrier for the first time. Nvidia burst into the select club of trillion-dollar companies in May 2023, when its dominant position in the development of artificial intelligence as a chip manufacturer propelled it to stardom amid the boom in generative AI. Since then, Nvidia has been breaking record after record, even surpassing three trillion dollars in market value a few weeks ago, thanks to an almost vertical rise in the stock market that has led its shares to rise 170% so far this year.

Many other companies have followed suit, benefiting from the euphoria of investors regarding anything bearing the AI ​​tag. One of them, Taiwan Semiconductor Manufacturing Company, known by its acronym TSMC, is already knocking on the door of the trillion-dollar club. The chip manufacturer is listed on the Taiwan Stock Exchange but is present on Wall Street through ADRs (American Depositary Receipt), certificates representing ownership of non-US shares and held in US banks. Its market capitalisation is close to 950 billion dollars after a 75% appreciation so far this year, reaching 146% since the beginning of 2023.

If nothing changes, in the next few days it will become the seventh most valuable company in the world, only surpassed by the also technological companies Microsoft, Nvidia, Apple, Amazon, Meta and the Saudi oil company Aramco. In its climb, TSMC has given the overtaking Warren Buffett’s investment vehicle, Berkshire Hathaway, which is worth almost 900 billion on the stock market.

The consensus of analysts expects TSMC to record a 36% revenue growth in its second fiscal quarter, which will be announced on July 18, the largest increase in sales since the last quarter of 2022. A development that will be accompanied, if it materializes, by the advance in semiconductor demand expected for the coming quarters. For now, the analysis firms that follow the stock show almost total confidence in its numbers. 95% of the experts consulted by Bloomberg have a buy recommendation for TSMC, although they consider its bullish potential to be exhausted.

Morgan Stanley has recently raised its target price and reiterates its overweight recommendation, highlighting that in the long term it is one of the winners of the artificial intelligence boom. In the case of Citi, its analysts have increased their target price by 12% due to the rebound in demand for its most advanced processors. For the next two years, the American investment bank expects an increase in its turnover of between 31% and 39%, which will add to the 29% increase it expects for this year.

Goldman Sachs strategists, meanwhile, point to another of TSMC’s strong points, its robust share buyback programmes. According to calculations by the bank’s research department, the Taiwanese company could announce the largest purchase of its own shares in its history by the end of the year, which will serve as an additional boost to its shares.

Furthermore, Taiwan has a very high weight in the global semiconductor industry. According to Mirabaud data, Taiwan manufactures most of the world’s advanced semiconductors and a large part of the latest generation. Furthermore, its largest customers include giants such as Apple, Nvidia, Broadcomm, AMD, Texas Instruments, Intel and Qualcomm, which has given rise to some alarm among analysts at a time when diplomatic relations between China and Taiwan have worsened, given that a possible confrontation between the two countries would have a high impact on the global technological sector. With a market share of 60%, Taiwan’s weight among semiconductor chip manufacturers is indisputable, given that it is 13 points ahead of its main competitor, Samsung.

New placement of Aramco

Saudi Arabia is preparing a new issue of shares in the world’s largest oil company, Aramco. After issuing a small package of shares in 2019, the country has been considering a new issue in recent weeks, in this case of a batch of shares representing 0.64% of the capital, with which it could raise around 13.1 billion dollars. With this placement, the company could expand its institutional investor base and at the same time provide Saudi Arabia with liquidity to undertake the pending economic reforms with which the state plans to reduce its almost total dependence on oil.

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