The stock climbed to within a whisker of its June peak this week after the Taiwanese chip designer announced a tie-up with Nvidia on an AI personal computer chip. On top of the companies’ existing partnership in automotive tech, the news helped fuel expectations for further gains in the shares after they more than doubled in the past two years.
The next collaboration could be a Windows on ARM AI PC chip at this year’s Computex Taipei trade show While the new PC chip is expected to provide little in terms of near-term sales given its niche customer group, overall hopes for the company’s AI-related business are high. Mumford said much of the excitement is related to the potential for application-specific integrated circuits for data centres.
Bears have retreated on the stock, with no sell ratings since May. Analysts have rushed to keep up with the rally, driving the average price target up 47% in the past year.Reflecting the growing positive sentiment, the shares currently trade at 20x forward estimated earnings, above the five-year average of 16x. That’s more expensive than the 19x for key foundry Taiwan Semiconductor Manufacturing Co, but it pales next to the 30+ multiples for the likes of Nvidia and Broadcom.
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