Global Investors Bet Big on AI Boom
Taiwan Semiconductor Manufacturing Co’s (TSMC) US-listed shares have reached a premium of almost 25% compared to their domestic market counterparts, indicating that international investors are willing to pay a premium for stocks poised to benefit from the artificial intelligence (AI) boom.
Easy Access and Index Inclusion Drive Premium
The chipmaker’s American depositary receipts (ADRs) have consistently traded at a premium to its Taipei-listed equities due to easier access for foreign investors and inclusion in popular indexes. However, the recent 24.6% premium marks the highest level since October 17, significantly above the daily average of 19% for this quarter.
Diverging Fortunes Drive Premium
The premium surged due to the differing performances of TSMC’s Taipei- and New York-listed stocks on Friday. While the company’s local shares closed down around 3.3% amid a nervous trading session across Asia, the mood improved by the time New York trading opened, pulling an index of semiconductor stocks higher. As a result, TSMC’s US shares ended the day around 1.3% higher.
Index Inclusion Fuels Demand
The ADRs are included in gauges like the Philadelphia Stock Exchange Semiconductor Index and in exchange-traded products such as the VanEck Semiconductor ETF and iShares Semiconductor ETF. This means that funds tracking these indexes must buy the US-listed securities, driving up demand and contributing to the premium.
Premium Shrinks as Local Shares Rebound
On Monday, TSMC’s local shares rose as much as 4.4%, reducing the premium to below 20%. However, this reduction may be short-lived, as US investors are expected to drive the premium back up when trading resumes.
AI Boom Drives Investor Appetite
The AI boom has sparked a frenzy of interest in semiconductor stocks, with investors eager to capitalize on the growth potential of companies like TSMC. As the demand for AI-powered technologies continues to rise, it’s likely that the premium for TSMC’s US-listed shares will remain elevated.
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