Source: Wall Street News

Morgan Stanley right$Apple (AAPL.US)$Edge AI (Edge AI) is full of expectations. The report released last week predicts that the plan will reignite iPhone sales growth and help Apple take the lead in the increasingly intense AI competition.

Meanwhile, Daimo's Charlie Chan analyst team believes that the biggest external beneficiaries of the Edge AI program may be$Taiwan Semiconductor (TSM.US)$.

The team said in a report released last week that due to AI training considerations, Apple's demand for self-developed M2 Ultra chips will continue to increase, which may further increase Apple's demand for TSMC's Info-LSI packaging technology and offset the decline in iPhone processor orders.

Damo further raised TSMC's target price to NT$860 and emphasized its importance to the global AI supply chain. It is expected that TSMC will outperform the entire semiconductor market in the long term.

As of press release, TSMC's stock price is NT$787, and there is still room for an increase of nearly 10% compared to the target price of Damo.

Apple's demand for AI training chips is expected to drive TSMC's revenue growth

According to Damo's recent semiconductor supply chain research, demand for TSMC's Info-LSI packaging technology is increasing significantly. This technology is mainly used by Apple's M2 Ultra.

The M2 Ultra is used in Apple's high-end Mac computers and can perform AI training. Damo pointed out that as demand for Apple's M2 Ultra chips increases, TSMC may benefit from this.

Starting in the second half of 2023, multiple reports suggest that the M2 Ultra may be used for training large language models (LLM), thanks to its large memory capacity (192 GB of unified memory and up to 800 GB/s bandwidth), and$NVIDIA (NVDA.US)$Compared to H100 (has 80GB of HBM3 memory).

Recently, Apple published research on major breakthroughs in LLM training, detailing its results in optimizing multi-modal LLM training.

Damo anticipates that the significant increase in demand for the M2 Ultra will bring low single-digit revenue growth to TSMC, which is expected to offset the possible decline in 3nm wafer orders due to weak demand for Apple iPhones.

Will TSMC wafers increase in price next year?

Given the increasing demand for high-performance chips in the cloud AI field, Damo believes that TSMC wafers are more likely to rise in 2025.

According to the Damo report, according to supply chain inspections, TSMC is in discussions with its major customers and plans to increase wafer prices by 10% in 2025.

Although we believe that the final price increase was close to 5%, this trend of price increases has become more obvious.

Meanwhile, given that Apple accounts for 20% to 25% of TSMC's revenue, Damo slightly raised TSMC's revenue forecast for 2025 and 2026, by a range of 1%-2%.

That is, from 2024 to 2026, TSMC's earnings per share (EPS) are expected to grow from NT$32.34 to NT$55.84.

According to TSMC's 2025 EPS, Damo believes that TSMC's current price-earnings ratio of 16 times is not high, and the stock price is extremely attractive. Damo predicts that in the future, TSMC's stock price will be revalued to 18 times the expected EPS in 2025.

As a result, we raised TSMC's target price to NT$860, the highest in the industry, and emphasized once again that TSMC is the preferred stock in the fields we cover.

Damo believes that from a long-term perspective, TSMC will stand out in the artificial intelligence semiconductor industry.

Whether the growth engine comes from GPUs or ASICs, cloud AI chips or Edge AI chips, it is likely that TSMC will rely on TSMC's leading manufacturing process.

As a result, compared to other stocks in the global semiconductor supply chain, TSMC's growth prospects in the field of artificial intelligence are more clear.

Editor/jayden