TSMC bulls ignore Warren Buffett’s warning for bet on coming artificial intelligence age

The frenzy over artificial intelligence is trumping geopolitical concerns over Taiwan Semiconductor Manufacturing Co., with its record stock rally powering ahead.

By:BLOOMBERG
| Updated on: Mar 18 2024, 09:22 IST
5 asteroids will pass Earth in the coming days, reveals NASA; Know the size, speed, and more
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1/5 Asteroid 2024 ER4: The first asteroid on the list is Asteroid 2024 ER4, which will come close to Earth on March 17, 2024. The space rock is estimated to be 37 feet wide and moving at a speed of 29879 kilometres per hour. On the specified date, the asteroid 2024 EH will approach within 162,000 kilometres. (Pixabay)
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2/5 Asteroid 2024 EP3: The next asteroid, Asteroid 2024 EP3, is 130 feet wide and will travel past the earth on March 17, 2024. The asteroid is travelling at 32193 kilometres per hour and will pass the planet at a distance of 4230000 kilometres  (Pixabay)
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3/5 JPL reports that the asteroid 2024 ED3 is 96 feet across. The space rock is flying at 35808 kilometres per hour and will pass close to Earth on March 18, 2024. On the specified day, the asteroid will pass by Earth at a distance of around 135000 kilometres. (Pixabay)
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4/5 Asteroid 2024 EN: The next space rock is Asteroid 2024 EN, which measures 140 feet wide. The asteroid is expected to come near to Earth on March 9, 2024. According to NASA, the asteroid is hurtling at 43101 miles per hour and will pass Earth at a distance of 1.4 million kilometres. (NASA)
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5/5 Asteroid 2024 EN3: The last asteroid scheduled to approach Earth is Asteroid 2024 EN3, which is predicted to be 55 feet wide. The asteroid is now moving at a speed of 22855 kilometres per hour. It is expected to pass within 2.1 million kilometres of Earth. (Pixabay)
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A smartphone with a displayed TSMC (Taiwan Semiconductor Manufacturing Company) logo is placed on a computer motherboard in this illustration taken March 6, 2023. (REUTERS)

(Bloomberg) -- The frenzy over artificial intelligence is trumping geopolitical concerns over Taiwan Semiconductor Manufacturing Co., with its record stock rally powering ahead. Foreign investors have boosted ownership of the stock to a two-year high, backing claims by TSMC that AI will be its biggest growth driver this year. The company has more than a 90% share in manufacturing advanced semiconductors used for AI, according to Pictet Asset Management.

The turnaround last year — the stock had plunged 27% in 2022 — came after Warren Buffett sold his $5 billion TSMC holdings, citing geopolitical tensions as the reason given its location. Adding to the concerns, the self-governing island elected a US-friendly president Lai Ching-te, putting in power a man Beijing has described as an “instigator of war.”

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“While geopolitics have historically been perceived as a risk for the sector, the strategic nature of these products and the desire to build local supply chains means that arguably geopolitics has become a tailwind for the space,” said Bernard Ahkong, co-CIO at UBS O'Connor Global Multi-Strategy Alpha. “We are still at the earlier stages of this upcycle in semiconductors.”

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The core concern about TSMC centers around its high concentration of chipmaking in Taiwan. The island produces the majority of the world's advanced logic semiconductors, and any military escalations across the strait with China would be a heavy blow to the global supply chain. 

Other than its dominance in advanced chips, it also has a more than 50% share of the overall foundry market, according to Pictet. That puts the company well on track to meet or exceed its long-term targets of 15-20% growth, said Anjali Bastianpillai, a senior client portfolio manager at Pictet.

The chipmaker's revenue rose 9.4% in the first two months, as demand from rising AI activities accelerated, offsetting slowing iPhone sales. TSMC's shares more than doubled from an October 2022 low, partly buoyed by gains in key customer Nvidia Corp.

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Addressing the market concerns, the company is making progress in diversifying operation bases. TSMC has announced a plan to build a second fabrication plant in Japan, while its Kumamoto factory will begin production this year. The chipmaker is also building two advanced facilities in Arizona and one factory in Germany. 

“Despite the geopolitical concerns, TSMC is a fundamental building block to gain exposure to AI and the broader recovery in semiconductors given the lack of companies with comparable quality in this space within emerging markets,” said Gary Tan, a portfolio manager at Allspring Intrinsic Emerging Markets Equity.

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First Published Date: 18 Mar, 09:22 IST
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