Overnight, TSMC had great news.

The US Department of Commerce will provide TSMC with $6.6 billion in subsidies to build an advanced semiconductor factory in Phoenix, Arizona, and provide up to $5 billion in low-cost government loans. Stimulated by this news, US stocks$Taiwan Semiconductor (TSM.US)$At one point, it rose more than 3% in the intraday period. As of press release, it had risen more than 3% before the market, which is only one step away from the all-time high.

Today, the Taiwanese stock TSMC rose 4.6% to NT$819. At one point during the intraday period, it rose to NT$820, a record high.

In addition to this, news continues from TSMC recently. The company is investing heavily in CoWOS packaging. On the one hand, it will expand production in Taiwan, and on the other hand, it plans to introduce this technology to Japan.

According to a report by Taiwan Economic Daily, TSMC will increase investment in the new advanced packaging plant in the Chiayi Science Park. The park will allocate six new plant sites to TSMC, two more than the four originally anticipated, with a total investment of over NT$500 billion.

It is worth noting that this round of investment is expected to drive a new wave of equipment imports. The market originally expected TSMC's CoVos monthly production capacity to reach 32,000 to 35,000 tablets by the end of 2024, but now it is expected to exceed 40,000 tablets.

According to a recent report by Taiwan Economic Daily, the main orders fell on CoWOS related equipment manufacturers such as Wanrun, Hongsu, and Xinyun. The relevant equipment manufacturers called out, “We work overtime every day, there are too many orders!”

Furthermore, despite the recent sudden earthquake in Hualien, Taiwan, which caused TSMC production to be interrupted for a short time, the company maintained the full-year revenue guidelines given in January.

After four years! TSMC returns to the top ten in the global corporate market capitalization list

Since this year, as continued optimism about artificial intelligence continues to push the stock price to a new high in March, TSMC has now returned to the top ten global corporate market capitalization rankings after a lapse of nearly four years.

You need to know that the last time TSMC ranked in the top ten global market capitalization dates back to the chip shortage period under the 2020 pandemic.

Sam Konrad (Sam Konrad), co-manager of Jupiter's Asia Revenue Strategy, pointed out that although American chip giants such as Nvidia, Broadcom, and US Ultra Micro lead the AI wave with their impressive chip design architectures, giants such as Microsoft and Amazon are known for their software products for consumers and enterprises, but behind their success, they are all inseparable from the support of TSMC, the world's “king of chip foundry.”

In the current context where demand for AI chips continues to rise, TSMC will undoubtedly continue to benefit as the only foundry for AI chips from Nvidia and AMD, the global AI chip leaders, and the only foundry for cloud giants such as Microsoft and Amazon to develop their own AI chips. Armed with the world's top core manufacturing technology and the most advanced Chiplet packaging, TSMC's “Nvidia Moment” — the moment when stock prices and performance begin to surge at the same time — may have arrived.

Wall Street crowds are singing a lot

Morgan Stanley is looking forward to Apple's Edge AI (Edge AI), and the team believes that the biggest external beneficiary of the Edge AI program may be TSMC. The bank said,

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.

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. The bank said,

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%.

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.

Coincidentally, Goldman Sachs analysts will also maintain a “buy” rating for TSMC in late March, raising the target price from NT$760 to NT$975.

In terms of production capacity, Goldman Sachs raised its 2024-2025 CoWOS (Chip on Wafer on Substrate) production capacity forecast from 304,000 to 441,000 to 319,000-600,000, and production capacity is expected to exceed expectations and double by 2025. This means that CoWoS production capacity will increase by 122% this year and 88% year over year next year, doubling for two consecutive years.

In terms of performance, Goldman Sachs raised TSMC's 2024-2025 earnings per share forecast by 2.6% to 2.7%. According to the report, the increase in TSMC's performance is mainly due to three points: 1) stronger demand prospects for artificial intelligence; 2) higher CoWoS production capacity; 3) the N3/N5 utilization rate (UTR) is expected to be higher due to better demand prospects for AI inference and edge AI.

In terms of profit, Goldman Sachs raised its forecast for TSMC's price-earnings ratio for the 2025 fiscal year to 20 times. According to the report, our target price-earnings ratio is to achieve 20 times the price-earnings ratio in fiscal year 2025 (originally 18 times, 0.5 percentage point higher than the 5-year transaction average); based on TSMC's compound annual profit growth rate of 19.3% in 2018-2021, we forecast a four-year compound annual growth rate of 19.6% between 2023-2026.

In addition, there are also organizations that are optimistic. TSMC is in a leading position in high-efficiency computing (HPC) and AI chips, and has close cooperative relationships with relevant market leaders, and continues to lead competitors such as Intel. The agency estimates that although TSMC continued to face the impact of the off-season in the second quarter, revenue for the second quarter will continue to grow, benefiting from the recovery in smartphone demand and the demand for AI chips. It is estimated that revenue will continue to grow by 5% in the quarter, and gross margin will decline slightly due to the 3nm release.

However, behind TSMC's impressive performance of soaring stock prices during the year, the hidden risks cannot be ignored. According to media reports, Taiwan's stock market has achieved an impressive 14% increase this year. Nearly two-thirds of the increase was contributed by the strong rise in TSMC's stock price. From the perspective of market capitalization, TSMC currently accounts for 32.5% of Taiwan's stock market value. This figure is undoubtedly particularly exaggerated. It also reflects the market's high expectations and dependence on TSMC. While seeking high returns, this investor should also be wary of potential risks.

Editor/Somer