In a recent development, Taiwan Semiconductor Manufacturing (TSMC) has experienced a significant surge in its stock price, driven by the rapid emergence of artificial intelligence (AI) technology. Over the past 12 months, TSMC's stock has soared by an impressive 58%, leading some investors to question if its growth potential has peaked. However, according to one Wall Street analyst, there is still room for further upsides.

Needham analyst Charles Shi has raised the price target on TSMC stock to $168, while maintaining a buy rating for investors. This latest target represents a potential upside of about 21% compared to the closing price on Wednesday. Despite acknowledging the potential challenges caused by short-term production delays and inventory losses due to a recent earthquake in Taiwan, Shi remains optimistic about TSMC's prospects.

Shi also emphasized that although there may be some setbacks in the upcoming quarter, TSMC is likely to compensate for any lost sales in the third quarter and meet its full-year forecast. Referring to TSMC as "one of the best AI pick-and-shovel stories," the analyst believes that the company is well-positioned to benefit from the increasing demand for processors that support AI technology.

TSMC recently reported strong Q1 results, with a 17% year-over-year revenue growth in local currency and a 9% increase in earnings per share (EPS). Management is also forecasting a 28% revenue growth in Q2, indicating a continued acceleration in growth. With the expanding AI industry expected to drive demand for TSMC's processors, the analyst's bullish stance on the stock appears well-founded.

While TSMC's current price-to-earnings (P/E) ratio of less than 27 suggests a slight discount compared to the S&P 500, the potential benefits of generative AI present an attractive opportunity for investors. The increasing reliance on AI technology and TSMC's role as a key player in manufacturing processors position the company for further growth.

It's worth noting that the Motley Fool Stock Advisor analyst team, while recognizing the promising potential in TSMC, did not include the stock in their list of top 10 stocks to buy now. However, their track record of identifying high-performing stocks suggests that investors may want to consider their recommendations for long-term growth.

In conclusion, Taiwan Semiconductor Manufacturing has experienced a significant boost in demand driven by the rise of artificial intelligence. With an analyst's increased price target and optimistic outlook, TSMC seems poised to capitalize on the growing AI industry and continue its upward trajectory in the market.