As the global semiconductor market continues to rise, Taiwan Semiconductor has continuously hinted at the possibility of price increases, and market expectations have also been raised.

In a recent research report, JPMorgan significantly raised its target price for the company by increasing its EPS expectations for the next few years and raising the target price from TWD 980 to TWD 1080. The report analyzes that this is mainly based on the acceleration of demand for data centers and artificial intelligence, especially the price increase of N3 and N5 process technology and advanced packaging technology (CoWoS).$Taiwan Semiconductor (TSM.US)$In a recent research report, JPMorgan significantly raised its target price for the company by increasing its EPS expectations for the next few years and raising the target price from TWD 980 to TWD 1080. The report analyzes that this is mainly based on the acceleration of demand for data centers and artificial intelligence, especially the price increase of N3 and N5 process technology and advanced packaging technology (CoWoS).

Citigroup analyst Laura Chen also raised her target stock price by 12% to NT$1150.

As of press time, the stock price of Taiwan Semiconductor is fluctuating between 940.00 NTD and 950.00 NTD, with about 14%-21% upside potential from Morgan and Citigroup's expectations. In the US stock market, Taiwan Semiconductor rose nearly 3% overnight and is up over 1% in after-hours trading.

Price increases will push gross margins up to 50%-60%.

Specifically, JPMorgan raised Taiwan Semiconductor's earnings per share forecast for 2024, 2025, and 2026 by 3%, 9%, and 8%, respectively.

The report predicts that the prices of N3 and N5 process technology will increase slightly starting from 2025, with growth ranging from 1% to 5%. At the same time, the price of CoWoS will also rise by about 10%.

The report points out that with the optimization of product portfolio (increased proportion of N3E) and the increase in N3 production, Taiwan Semiconductor's gross margin is expected to rise from the second half of 2025 to the first half of 2026, reaching 50% to 60%.

We believe that with the strengthening of the cyclical recovery, there is further room for gross margin improvement, as Taiwan Semiconductor has upward potential in the application of N7 and old process nodes.

JPMorgan predicts that Taiwan Semiconductor's EBIT will continue to grow at a compound annual growth rate of 22% after 2024 until 2027. This indicates that Taiwan Semiconductor's operating efficiency and profitability will continue to improve. At that time, free cash flow will also increase significantly.

It is predicted that Taiwan Semiconductor plans to use 70% of its free cash flow to pay cash dividends. By 2027, Taiwan Semiconductor's annual cash dividends will reach NT$35, with a compound annual growth rate of 36%. This means that dividends are almost more than twice the expected dividends in 2024.

The field of artificial intelligence will experience strong growth.

Taiwan Semiconductor's strengths will also be reflected in its long-term strategic layout in the field of artificial intelligence.

JPMorgan predicts that by 2028, Taiwan Semiconductor's artificial intelligence-related revenue is expected to account for 35% of its total revenue, of which 28% comes from artificial intelligence demand in data centers, and 7% comes from artificial intelligence demand in edge computing.

The report points out that Taiwan Semiconductor maintains a leading position in the field of artificial intelligence chips, especially in the N3, advanced packaging technology (CoWoS and SoIC), and N2/A16 process node design advantages, which ensures Taiwan Semiconductor's leading position in this rapidly growing market.

JPMorgan's research report emphasizes that Taiwan Semiconductor almost monopolizes the AI accelerator and edge computing chip fields, and is expected to continue to lead the market in the coming years with its strong process roadmap (N3 and N2) and industry-leading packaging technology.

In addition, it is expected that Taiwan Semiconductor will increase capital expenditures in the second half of 2024 and 2025, mainly for investment in N3, advanced packaging technology, and N2 process, with capital expenditures of about US$31 billion in 2024 and increasing to US$35 billion in 2025.

The report points out that these investments will further consolidate Taiwan Semiconductor's dominant position in the global semiconductor market and support its continuous development in emerging technology fields.

Editor/Somer