The Taiwan Semiconductor Manufacturing Co (NYSE: 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 (NASDAQ: NVDA) AI GPUs and Apple Inc (NASDAQ: AAPL) smartphones.
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 (NYSE: 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 (NSYE: SMH) and iShares Semiconductor ETF (NYSE: SOXX).
Price Action: TSM stock traded lower by 1.75% to $194.76 at the last check on Monday.