Taiwan Semi Stock Kicked Off 2022 With Its Best Day in Years. Here’s Why.

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The first trading day of 2022 was a breakout one for

Taiwan Semiconductor Manufacturing. American depositary shares of the key chip maker had its best day since July 2020 on Monday.

TSMC (ticker: TSM) ADRs rose 7.1% to close at $128.80—good for its biggest percentage gain since July 29, 2020, according to Dow Jones Market Data. The stock is now 8% below an all-time closing high of $140.05 set on Feb. 16, 2021. The

PHLX Semiconductor Index, or Sox, rose 2.1% while the

S&P 500 index was up 0.6%.

The gain for TSMC stock came despite a lack of material updates from the chip maker. Wedbush analyst Matthew Bryson told Barron’s via email that it may be a combination of three factors.

The biggest news was a disclosure from

ASML Holding

(ASML) about a fire inside a part of its factory in Germany. ASML, which makes the equipment that makes chips, said it was too early to make a statement on the damage or whether it would impact its output plans. The company plans to take a few days to investigate and make a full assessment.

“Any limits to ASML output tied to today’s fire could hinder (at least in the near term) planned foundry production adds: typically supply limitations create better fundamentals in semis and TSMC is the largest supplier of production from advanced nodes today (which require EUV tools from ASML),” Bryson said.

Beyond that news, Bryson says TSMC can be seen as a proxy for a number of stocks performing well on Monday, including

Apple

(AAPL), which is its largest customer, as well as

Advanced Micro Devices

(AMD),

Nvidia

(NVDA), and

Marvell Technology

(MRVL). Such stocks were up more than 2% on Monday, with AMD stock standing out with a 4.4% gain.

The explanation could be even simpler: TSMC stock has underperformed peers such as

United Microelectronics

(UMC), as well as the aforementioned key customers, Bryson says.

“Today could be a bit of catch-up,” Bryson said.