Ark remains bullish on the AI industry, buying Taiwan's national pride and semiconductor giant TSMC's ADR.

ARK's automation technology and robotics ETF, ARKQ, bought into Taiwan's semiconductor giant TSMC ADR yesterday, holding a total of 98,680 shares valued at $10.53 million. This marks ARK's re-entry into TSMC stock since April 2021.

What is TSMC ADR? How is it different from stock code 2330?

ADR stands for American Depositary Receipts, which are stock certificates of non-U.S. companies listed on the U.S. stock exchange. Companies like TSMC issue ADR to make it easier for U.S. investors to buy Taiwanese stocks and to increase their visibility and raise funds in the U.S. market.

TSMC issued ADR to the U.S. in 1997, with the stock code TSM, and the exchange rate with the Taiwan stock market is 1:5. Since ADR is a portion of the stocks issued by TSMC in Taiwan, theoretically, the prices of the two should not differ significantly.

To convert the price of TSMC ADR into the stock price of 2330 in Taiwan, you can use the following formula:

USD to TWD exchange rate × TSMC ADR stock price ÷ 5 = TSMC 2330 stock price

For example, if the price of TSMC ADR was $106.8 yesterday and the USD to TWD exchange rate is 30.75, then the price of TSMC ADR converted into Taiwan's stock price would be: 30.75 × 106.8 ÷ 5 = 657

Contrasting with the closing price of 590 TWD for TSMC 2330 today, it is 11% higher, indicating an 11% premium of TSMC ADR compared to TSMC 2330 in Taiwan.

Although this premium space is not arbitrageable for general investors, it can serve as an indicator of market sentiment. Moreover, TSMC's P/E ratio has always been relatively low compared to other U.S. tech stocks, which is one of the reasons it is favored by foreign investors.

Cathie Wood Still Bullish on AI Industry

Ark Invest's Cathie Wood stated in May that she remains bullish on the AI industry. She specifically mentioned the performance of Tesla and Meta, the parent company of Facebook, in AI technology.

Yesterday, Ark Invest bought Meta while also purchasing TSMC, but adjusted by selling some Tesla shares.

TSMC's stock price has benefited this year from orders from AI chip factories, leading to a continuous surge in stock price. It has risen by 31% so far this year, approaching the previous high of 688 TWD!