TSMC has a high degree of dominance in advanced logic chip manufacturing. (Reuters photo)
[Financial Channel/Comprehensive Report] The AI craze continues to drive up semiconductor demand. Although NVIDIA is the focus of the market, foreign media "24/7 Wall St." pointed out that almost all the most advanced AI accelerators must rely on TSMC's advanced process production, making TSMC an indispensable key player in the AI chip supply chain. The latest analysis gives TSMC a "buy" rating and a target price of US$552.36. Based on the recent stock price of US$472.36, there is still room for growth of 16.9%. If the market further improves valuations, the stock price may even challenge US$612, with a potential increase of approximately 29.5%.
"24/7 Wall St." pointed out that one of the most important AI stocks is not Huida, but TSMC. According to report analysis, TSMC’s investment value lies in the fact that no matter which company designs the AI chip, as long as it uses the most advanced process, TSMC will have the opportunity to benefit from it. Huida is one of TSMC's largest customers, and its AI accelerators rely on TSMC's production. The development of customized AI chips by companies such as Broadcom also creates demand for TSMC. In contrast, TSMC does not have to bet entirely on a single AI brand, but can derive revenue from the growth of the entire AI chip industry.
TSMC’s recent operating data also provides support for the bull argument. The company's second-quarter earnings per share reached US$4.31, higher than market estimates of US$3.887; revenue increased 36% year-on-year to US$40.2 billion, and gross profit margin reached 67.7%. In addition, revenue in August increased by 53.3% year-on-year, and management also revised its full-year revenue growth forecast upward to just over 40%, and increased capital expenditures in 2026 to US$60 billion to US$64 billion, showing that the company is continuing to invest resources in response to the demand for advanced processes and AI chips.
In terms of technology layout, foreign media pointed out that TSMC management expects that strong demand may continue from 2029 to 2030. Advanced packaging production capacity is still tight, and the A14 process is expected to begin mass production in 2028. If TSMC continues to maintain its leading position in advanced processes and gradually keeps its production capacity in line with market demand, it will help support future revenue growth and pricing capabilities.
In terms of valuation, "24/7 Wall St." calculated based on a price-to-earnings ratio of 30 times estimated future earnings per share, TSMC's stock price is expected to reach US$612, which is approximately 29.5% higher than US$472.36. However, this is not without risks. TSMC expects that the initial mass production of the 2-nanometer process will reduce its gross profit margin by about 3 to 4 percentage points, and its gross profit margin in the third quarter is estimated to be 65% to 67%. In addition, the situation in the Taiwan Strait, exchange rate fluctuations, and large-scale capital expenditures may also affect profit performance and market evaluation.
Foreign media also compared the valuations of TSMC and major AI chip companies. Huida estimates a price-to-earnings ratio of approximately 25 times, with a revenue growth rate of 105.9%; Broadcom estimates a price-to-earnings ratio of approximately 19 times, and AI semiconductor revenue growth of 221%. As for wafer foundry competitor Intel (Intel), its wafer foundry division lost US$2.1 billion in a single quarter, showing that it is not easy to catch up with TSMC’s advantages in process and manufacturing capabilities.
However, foreign media also reminded that TSMC’s stock price does not only rise but never fall. If the market revise its valuation downwards and the price-to-earnings ratio drops to 18 times, the model predicts that the stock price may fall back to US$367, a decrease of approximately 22.3% from US$472.36. If tensions in the Taiwan Strait increase, or large cloud service providers reduce AI capital expenditures, it may also have a major impact on TSMC.
Overall, the core reason why foreign media are optimistic about TSMC is its position in the fields of advanced processes and advanced packaging, as well as the long-term growth opportunities brought by the demand for AI chips. However, the target price is still based on conditions such as continued revenue growth, gross profit margin decline in line with expectations, and the market's willingness to maintain higher valuations. Investors must still pay attention to the variables brought about by the industrial boom, geopolitics, and capital expenditures.
