Investing.com-- Shares of Taiwan Semiconductor Manufacturing Co (TSMC) surged to a record high on Tuesday after the world’s largest contract chipmaker won a $6.6 billion subsidy from the U.S. government for a plant in Arizona.
Taiwan shares of TSMC (TW:2330) jumped about 4% to a record high of T$817.0. They also underpinned an over 1% rise in the TWII.
TSMC's American Depository Receipts (NYSE:TSM) rose 1% in overnight trade.
The U.S. Commerce Department said on Monday it will award TSMC a $6.6 billion subsidy for an advanced semiconductor plant in Phoenix, Arizona, and that the chipmaker was also eligible for up to $5 billion in low-cost loans.
The move comes as TSMC agreed to increase its planned investment for its Arizona facilities by $25 billion to $65 billion, and that it will also produce the world’s most advanced 2 nanometre chips in the facility. Production is set to begin in 2028.
TSMC benefits from AI demand
TSMC, which is a key supplier to technology majors including NVIDIA Corporation (NASDAQ:NVDA) and Apple Inc (NASDAQ:AAPL), had announced plans for the Arizona facility several years ago. But the facility’s fate came into question after the chipmaker saw a slump in chip demand over the past two years, which limited the amount of cash available to invest in the facility.
But TSMC saw a swift reversal in fortunes in recent months, amid increasing interest in artificial intelligence. The firm’s most advanced chips play a key role in powering the processors used to run generative AI programs.
Its biggest customer, Nvidia, has also become a key player in developing AI chips, and is expected to help underpin demand for TSMC’s products. TSMC recently forecast improved earnings in the coming months on the back of AI demand.
The U.S. subsidy for TSMC also reflects increased efforts by the Biden administration to bring AI development closer to the U.S.
AI hype also provided a major boost to TSMC's shares this year. Taiwan shares of the firm were trading up about 38% so far this year.