J.P. Morgan has revised its price target on Taiwan Semiconductor Manufacturing’s (TSM) shares, increasing it to NT$850 from NT$770, citing expectations for revenue growth in the field of artificial intelligence (AI).
Following this update, TSM’s stock surged approximately 4% on Wednesday.
Analyst Gokul Hariharan and his team anticipate significant growth opportunities for TSM in the AI sector over the next three to four years. They view TSM as a key player in enabling AI processing both at data centers and at the edge. The analysts predict that TSM’s exposure to AI will increase to 25% by 2027.
According to J.P. Morgan, TSM’s role as a key enabler for AI semiconductors is becoming increasingly established. The company is experiencing ramp-ups in various AI-related processor programs, including Graphics Processing Units (GPUs), Application-Specific Integrated Circuits (ASICs), and edge-AI processors in 2024, with further growth expected in 2025.
Hariharan forecasts that TSM will maintain over 90% market share in AI-related silicon over the next few years. He also expects AI-related revenues to contribute 25% of TSM’s total revenues by 2027, with 19% stemming from AI at data centers and the remainder from edge AI.
J.P. Morgan emphasizes TSM’s strong position in AI semiconductors, citing its tightly integrated packaging technologies, leading process technology, and support from a comprehensive intellectual property (IP) and design service ecosystem in the semiconductor industry. These factors contribute to TSM’s robust competitive advantage in the AI semiconductor market.
J.P. Morgan also observes indications within the supply chain suggesting that Intel (INTC) is expanding its outsourcing to Taiwan Semiconductor Manufacturing (TSM) in the N3 era, which is anticipated to drive stronger growth for TSM in 2025-26.
Hariharan believes that TSM’s process leadership is poised to persist through the N2 fabrication technology era, with a notable increase in initial customer engagements.
The analysts have made slight upward revisions to their estimates for fiscal year 2025 and anticipate that the company will achieve earnings power in the range of NT$55-60 in 2026, as revenue growth continues to strengthen with the ramp-up of N3 and early revenues, along with gross margins likely moving into the mid-late 50% levels.
According to Seeking Alpha’s Quant Rating system, Taiwan Semiconductor Manufacturing (TSM) currently holds a Hold rating. However, Seeking Alpha authors and Wall Street analysts, on average, are more positive, with a Buy rating and Strong Buy rating, respectively. It’s worth noting that the Quant Rating system at Seeking Alpha has a track record of consistently outperforming the market.