Over the past year, TSMC's valuation has surged significantly. As the world's largest contract chip manufacturer, the company has benefited from the skyrocketing demand in the artificial intelligence industry.
However, in terms of valuation, TSMC's American Depositary Receipts (ADRs) have a significant premium compared to its Taiwanese stocks. On Tuesday, TSMC's ADRs rose to $172.60, while on Wednesday, the company's Taiwanese stocks were about TWD 953 (approximately $29).
Goldman Sachs analysts pointed out that this premium is mainly due to the differences in the investor bases between the U.S. and Taiwanese capital markets. They also mentioned the regulatory difficulties in converting TSMC common stock into ADRs.
Goldman Sachs expects the ADR premium might expand further, benefiting from the positive growth driven by artificial intelligence. They also noted that selling ADRs with high premiums to buy discounted common stocks might not yield immediate profits. Given the doubling of valuation over the past year, TSMC is also susceptible to profit-taking.
However, due to the optimistic sentiment around artificial intelligence, institutional investors have considerably increased their holdings in TSMC. Goldman Sachs indicated that this suggests the stock is experiencing a "crowded" trade among institutions.
