As it is about to enter the "trillion dollar club", Goldman Sachs, JPMorgan, and others have raised Taiwan Semiconductor's target price. They believe that the surge in AI demand and price expectations will boost the company's profits.
In the AI wave, up to now this year.$Taiwan Semiconductor (TSM.US)$The stock price of the US stock market has risen by more than 74% cumulatively. Last week, Taiwan Semiconductor surpassed Berkshire Hathaway, owned by the "stock god" Buffett, to become the eighth largest company in the global market value. This week, the stock price of Taiwan Semiconductor hit a new high, and the market value approached 1 trillion US dollars.
As we are about to enter the "trillion-dollar club", many Wall Street brokerages such as Goldman Sachs and JPMorgan have raised their target price for Taiwan Semiconductor this week, stating that the surge in AI-related demand and the potential price increase action in 2025 may boost Taiwan Semiconductor's profits.
Goldman Sachs is the most optimistic about TSMC's prospects, raising their target price for the chipmaker by 19% to TWD 1,160, with the expectation that the 3nm and 5nm chip-making prices will rise by "low single-digit percentages."
JP Morgan stated that Taiwan Semiconductor may increase its revenue outlook for 2024 and may also raise capital expenditures to the high end of the guidance range. JP Morgan predicts that by 2028, AI will contribute 35% of TSMC's total sales.
Taiwan Semiconductor also stated earlier that it expects capital expenditures to be between $28 billion and $32 billion in 2024 and may increase to $35 billion to $40 billion in 2025, mainly for the research and development and production of 2/3-nanometer processes.
Recently, both Citigroup and Morgan Stanley have raised TSMC's target price. Both investment banks believe that as AI technology rapidly develops and its applications expand, TSMC will benefit from the chip demand from data centers and edge AI, especially at the more advanced 2/3 nm process nodes.
Citigroup predicts that by the end of 2025, most of the world's AI GPUs will migrate to the 3nm process, which will bring more orders to TSMC, and its 3nm process utilization rate is expected to remain tight next year. TSMC is expected to receive more 3nm chip orders by 2025, especially from customers such as Apple, Qualcomm, and MediaTek.
In addition, on June 5th, Morgan Stanley analyst Charlie Chan led a research team to release a report, predicting that TSMC may raise wafer prices by 5% in 2025 to maintain its gross margin at or above 53%, and stated that if Nvidia accepts the price increase, other key AI customers may follow suit.
In the AI wave, as the main chip contract manufacturer for technology giants, TSMC has reaped great benefits. Goldman Sachs Analyst Bruce Lu stated, "As AI continues to evolve, we believe TSMC is one of the main beneficiaries."
With high demand for AI chip orders, TSMC achieved strong sales growth in May. The company's sales in May were 229.62 billion New Taiwan dollars (approximately 7.114 billion US dollars), a year-on-year increase of 30.1%. From January to May this year, TSMC's cumulative sales were NT$1.06 trillion (approximately US$32.839 billion), a year-on-year increase of 27%.
At the shareholders' meeting, the then-chairman of TSMC, Liu Deyin, stated that AI demand is more optimistic than a year ago. With the application of AI and the higher requirements for chips, TSMC is confident in its future growth.
Editor/Somer