Artificial intelligence

Apple AI Boots: Bank of America Raises TSMC Target to $180

Bank of America has raised its price objective for TSMC to $180, noting the company’s drive into AI and this year’s 60% stock jump.

TakeAway Points:

  • Shares of Apple have increased by 6.4% as a result of its AI ambitions, which also include improving Siri and integrating ChatGPT. Analysts anticipate huge growth.
  • With Bank of America increasing its price target for TSMC to $180, which implies an 8% increase, the company is well-positioned to benefit from Apple’s AI effort.
  • Analysts at UBS and Barclays have expressed some scepticism, although overall market opinion of Apple’s AI approach is still favourable.

Apple’s AI Incentives

Apple’s recent announcement of its foray into artificial intelligence (AI) has garnered significant attention from both investors and analysts. 

During the Worldwide Developers Conference (WWDC) on Monday, Apple introduced “Apple Intelligence,” which integrates OpenAI’s ChatGPT and enhances the Siri digital assistant. This move is seen as a pivotal moment for the company, with shares rising as much as 6.4% to a record high on Tuesday.

Analysts have responded positively to Apple’s AI initiatives. D.A. Davidson’s Gil Luria upgraded Apple shares to a buy and increased the price target to $230 from $200, implying a 19% upside from Monday’s close. 

Luria likened the announcement to Apple’s previous milestone moments, such as the transition of digital music to iTunes, emphasizing Apple’s unique position due to its access to consumer data and trust.

“We believe yesterday’s presentation rhymes with one of Apple’s previous milestone moments,” Luria wrote.

Goldman Sachs analyst Michael Ng noted the financial implications of the new AI features, suggesting they could fuel an iPhone upgrade cycle and create opportunities for AI monetization. Morgan Stanley’s Erik Woodring also highlighted the potential for a rapid device replacement cycle, forecasting 227 million units in fiscal 2025, rising to 238 million units in fiscal 2026. 

“The upgrades give Apple a strong position with the most differentiated consumer digital agent,” Woodring stated.

The role of Taiwan Semiconductor

Taiwan Semiconductor Manufacturing Co. (TSMC) stands to benefit significantly from Apple’s AI advancements. Bank of America analyst Brad Lin raised his price objective for TSMC, citing the chipmaker as an “indispensable and reliable partner” for Apple. TSMC supplies Apple with A- and M-series semiconductors, positioning it well for multi-year growth as Apple’s AI services expand.

TSMC’s U.S.-listed shares have already surged roughly 60% this year, with Lin’s $180 price objective implying an additional 8% upside from Tuesday’s close. The stock saw a nearly 4% increase in trading on Wednesday. 

Lin emphasized that Apple accounts for about one-quarter of TSMC’s revenue, and the focus on privacy in their chips bodes well for demand.

“We believe the semi demand upside from Apple can get bigger with its widening AI service,” Lin wrote.

Responses of the Market and Scepticism

While many analysts are optimistic about Apple’s AI strategy, some remain cautious. UBS analyst David Vogt expressed disappointment, stating that the announcement did not meet expectations and would not lead to a significant iPhone upgrade cycle this fall. 

Barclays analyst Tim Long also viewed the AI announcements as “more of an evolution” rather than a revolutionary change, noting that the event did not serve as a catalyst for the stock.

Despite these reservations, the overall sentiment remains positive. Citigroup analyst Atif Malik called the WWDC the “best ever,” highlighting Apple’s advantage in hardware and software integration. Evercore ISI’s Amit Daryanani pointed out that Apple’s lead in silicon and user data would help it offer unique generative AI options.

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