Morgan Stanley highlighted Taiwan Semiconductor Manufacturing as its top stock pick once again after strong artificial intelligence capital expenditures from Meta and Microsoft helped dispel concerns. The bank currently has an overweight rating on shares of the Taiwan-dominated Taiwan Semiconductor Manufacturing. Analyst Charlie Chan’s price target of NT$1,288.00 implies a potential upside of 42% from the stock’s April 30 close of NT$908.00. Shares of the Taiwan-traded Taiwan Semiconductor Manufacturing have shed 12% this year. The stock’s American Depositary Receipt, trading under the ticker TSM on the New York Stock Exchange, has slipped nearly 13% over the same period. TSM YTD mountain TSM YTD chart Chan wrote that previously, three major overhangs “kept us from making this, the best-quality stock we cover, our Top Pick during the recent stock market turbulence.” However, strong AI spending from the “Magnificent Seven” has since changed his mind. “With the robust AI capex guidance from Meta and Microsoft, we move TSMC back to our Top Pick,” he wrote. “We have expected a quick rebound in the stock once these overhangs are removed.” The first overhang Chan cited was questions about the sustainability of AI demand. Meta and Microsoft ‘s suggestions that AI demand remains strong has helped ease these concerns, he said. Meanwhile, a joint venture between Taiwan Semiconductor and Intel has now been ruled out . Ultimately, this might be to the company’s benefit, Chan added. “Since Intel’s technology operates quite independently, we can see why TSMC management didn’t see a JV possibility,” he wrote. “This echoes our earlier view that TSMC’s interest in this might be low because it wouldn’t benefit the company’s shareholders and would create conflict with its other customers.” The final overhang that has been removed is concern about the impact of U.S. tariffs on semiconductors and semiconductor manufacturing equipment, which are likely to be announced after May 7, Chan said. The analyst expects the costs, if any, will be absorbed by customers. “We believe TSMC’s US$165bn investment in the U.S. may increase the chance of exemption. Even if there will be some semi tariffs, in its previous earnings call, TSMC already said that the cost would be transferred to customers,” Chan wrote.
