Taiwan Semiconductor Manufacturing Co. (TSMC) gained its most in more than three years after Morgan Stanley lifted its price target on Nvidia’s chipmaker by about 9%, citing its growing AI business.

Taiwan’s largest company soared 9.8% after resuming trade following the weeklong Lunar New Year break, the biggest intraday climb since July 2020.

The company’s surge propelled Taiwan’s benchmark index to a record high, as expectations of booming demand for artificial intelligence technology drove investor sentiment.

The Taiex climbed 3%, surpassing a January 2022 peak, the bulk of the gain coming from TSMC, the island’s largest stock and the key provider of foundry services for Nvidia.

The new peak came as investors continued to pile into the AI theme, driving up shares of chipmakers and other tech firms globally. The Philadelphia Stock Exchange Semiconductor Index climbed to a new high recently while Nvidia’s market capitalization has soared to around $1.82 trillion, surpassing Amazon and Alphabet.

TSMC, which has a weighting of around 30% in the Taiex, reported during the holiday that its January sales rose 7.9% from a year ago. Executives from the company met with Nvidia CEO Jensen Huang last month to discuss AI chip supply constraints, a major challenge to the AI boom.

"Taiwan’s been driven by tech, especially the AI theme,” said Xin-Yao Ng, an investment director for Asian equities at abrdn. "Nvidia has been a catalyst adding on to the sentiment, after Jensen Huang visited Taiwan, boosting investors appetite for AI value chain plays and Nvidia suppliers.”

The lure of further gains in TSMC and other tech stocks has brought an inflow of cash from international investors. Foreign funds have bought nearly $14 billion worth of Taiwanese equities on a net basis since the end of October, data compiled by Bloomberg show.

As the market picks up, TSMC — also the main chipmaker to Apple — is expected to benefit from a boom in AI development, which requires advanced chips.

The migration to bigger ChatGPT-like large language models should boost demand for higher-end chips, which benefits TSMC’s leading-edge foundry business, Morgan Stanley analysts including Charlie Chan wrote this week.