Taiwan Semiconductor Manufacturing (TSM) is tracking well above expectations as its reported May sales showed that the company met close to 75% of Q2 estimates in two months, Wedbush said in a note on Tuesday.

The company said Tuesday its May net revenue rose by 39.6% year-over-year to 320.52 billion New Taiwan dollars ($10.70 billion).

The chipmaker's performance is largely attributed to momentum in artificial intelligence silicon and rising enterprise integrated circuit demand to support AI deployments, according to the note.

Wedbush analysts said foreign exchange rates remain a growing concern and recent fluctuations created about 2% headwind to gross margins for the quarter.

"We see Taiwan Semiconductor's strength as a positive for both its capital equipment supply chain and other portions of the semiconductor process supporting AI demand," Wedbush said.

The firm reiterated an outperform rating on the company's stock with a NT$1,200 price target.

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