Overnight on March 8th, the ADR stock price of TSMC (Taiwan Semiconductor Manufacturing Company) surged by more than 5%, breaking through its historical high to reach $149.98 per share, with its market value during trading hours soaring to over $770 billion. This rise continues its strong performance, with the stock price having increased by over 70% since the low point in October last year.
TSMC's robust performance has not only caught the eye of investors but has also garnered attention from Wall Street. Morgan Stanley subsequently raised its target price for TSMC from 758 Taiwanese dollars to 850 and reaffirmed its overweight rating on the stock. This adjustment reflects Morgan Stanley's optimistic view on TSMC's future growth potential.
Analysts note that TSMC's recent stock price surge is mainly due to the continuous growth in global demand for advanced semiconductor technology, especially in the fields of 5G, high-performance computing, and artificial intelligence. The demand for semiconductors for generative AI has been particularly notable, becoming one of the significant drivers of TSMC's performance growth.
J.P. Morgan noted in a report that by 2027, TSMC's revenue from the AI sector is expected to account for 25%, with 19% coming from AI applications in data centers and the rest from edge AI. Additionally, with the migration to the N3 process for AI accelerators, TSMC is expected to gain more benefits, with the revenue from the N3 process anticipated to be 47% higher than the peak of the N5 process.
It is worth mentioning that the orders outsourced to TSMC by Intel are also increasing. According to J.P. Morgan, Intel is ramping up its outsourcing orders on TSMC's N3 process, and by 2025, TSMC's revenue from Intel is expected to reach $8-9 billion. This move will further expand TSMC's share in the high-performance computing market.
With the increase in orders, by the first half of 2025, TSMC is expected to manufacture about 90% of the PC CPUs, including Intel's ArrowLake and Lunarlake processors, Apple's M3 processor, and AMD's Zen 5 processor. This will further solidify TSMC's position in the high-performance computing market.
Furthermore, with the improvement in TSMC's profitability, its gross margin is expected to expand, reaching a level of 55-60% by 2026, which will drive earnings per share to reach 55-60 Taiwanese dollars.
