Last month, Bank of America analysts said they view Taiwan Semiconductor Manufacturing (NYSE:) as a “key AI enabler with long-term leadership,” raising their share price target by $120. This bullish stance on the contract semiconductor maker is widely shared on Wall Street, with TSMC shares recently seeing a series of targeted price increases and bullish commentary.
All AI roads lead here
Shares of TSMC, known for making chips for some of the world’s leading artificial intelligence processors, have risen more than 33% and 36% year to date in Taipei and the US, respectively.
In March, JPMorgan analysts named the chipmaker a critical player for “nearly all artificial intelligence processes in the data center and edge.”
The investment bank predicts that TSMC will maintain its dominant position in the artificial intelligence processor market, with more than 90% market share in the next three to four years. They also expect TSMC’s AI revenues to grow from 6% in 2023 to 27% by 2027.
These revenue growth forecasts are primarily driven by Taiwan Semi’s significant advances in high-performance computing (HPC), increased acquisition of systems companies, and a robust pipeline for N3 technology in 2024 and 2025. In addition, the launch of N2 technology is expected in 2026.
“We expect Intel (NASDAQ:) to account for about 2-3% of TSMC’s revenue in 2024, rising to 7-9% in 2025,” JPMorgan analysts said in a note last month.
Analysts raised target prices for TSMC shares
Wall Street’s bullish correction in TSMC stock has continued in recent weeks, with analysts at Susquehanna and Barclays also raising their 12-month price targets.
A Susquehanna analyst on Tuesday raised earnings estimates and price targets for the U.S.-listed semiconductor stock from $160 to $180, implying nearly 30% upside from its last closing price.
“We are increasing CY24/25 EPS estimates as recent checks show blended ASPs tracking better than expected,” the analyst said.
This bullish stance is shared by Lynx Equity Strategies, whose team of analysts just raised their target price for Taipei-listed TSMC shares to NT$900 from NT$750 set a few months ago.
“After suggesting in the previous earnings report that management may have been conservative in annual revenue growth guidance of 20-20%, their conservatism, in our view, is due to the uncertainty of the timing of new customer acquisitions at the end of the year “Lynx analysts write.
“With the quarter behind us, we expect the company to become more prominent in the remainder of the year. We expect our unchanged full-year revenue estimate to grow 27% versus the consensus estimate of 23%.”
The analyst firm forecasts faster initial production growth for Taiwan Paul’s 3nm process compared to 5nm.
While the contribution of 5nm technology has stabilized at around 20% within two years of its launch, the 3nm node has already reached 15% of total revenue within two quarters of its introduction, analysts highlight.
They also expect a shorter gap between the 3nm transition and the upcoming 2nm process, shrinking to two years compared to the three-year gap seen between 5nm and 3nm developments. The acceleration is due to the company’s aggressive planning and rising demand for advanced technologies, which bodes well for semiconductor capital equipment companies.
“As data centers accelerate the pace of their transition to AI workloads and move to more energy-efficient shared computing servers, we believe TSM is a key beneficiary. We expect the customer base for the 3nm process to expand beyond AAPL. We believe AAPL is likely the leading customer for the 2nm node that has not yet been deployed,” the analysts said.