The Taiwan Semiconductor Manufacturing Co TSM arbitrage trade presents an opportunity to monetize the premium in the ADR by buying the local shares while shorting the U.S. listing.
The contract chipmaker stock has surged over 2,900% since inception, backed by the artificial intelligence frenzy spurred by the emergence of OpenAI’s ChatGPT.
Taiwan Semiconductor is a key contract chipmaker for Nvidia Corp NVDA AI GPUs and Apple Inc AAPL smartphones.
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Goldman Sachs told Bloomberg it expects demand for Taiwan Semiconductor’s Taipei-traded stock to surge as Taiwan’s regulator considers amending the ownership of local exchange-traded funds.
Taiwan Semiconductor member weighting in local equity benchmark Taiex climbed to 37%, making adjustments in ETF products tracking the index difficult.
Taiwan’s Financial Supervisory Commission is exploring the removal of the 30% cap for constituent member stocks in the market capitalization of local index ETFs.
The changes, likely by the first half of 2025, could raise the current 30% single-stock weight limit and affect share allocations.
Meanwhile, Big Tech giants remain invested in their AI endeavors. Apple earmarked over $500 billion for U.S. investments, focusing on AI, silicon engineering, and expanding advanced manufacturing.
Alibaba Group Holding BABA announced a 380 billion yuan (nearly $53 billion) investment in its cloud computing and AI infrastructure.
Investors can gain exposure to Taiwan Semiconductor through VanEck Semiconductor ETF SMH and iShares Semiconductor ETF SOXX.
Price Action: TSM stock traded lower by 1.75% to $194.76 at the last check on Monday.
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