I am optimistic that TSMC will continue to rise! The latest predictions from foreign media are released, Huida and Broadcom both rely on it

Foreign media continue to be optimistic about TSMC. (Bloomberg file photo)

[Financial Channel/Comprehensive Report] The artificial intelligence (AI) boom continues to drive up demand for semiconductors. Major chip design companies such as NVIDIA and Broadcom have become the focus of the market. However, foreign media pointed out that these AI chips have the same key supplier behind them, which is TSMC. Since most of the world's most advanced process wafers rely on TSMC for production, TSMC's current valuation is relatively low compared to Huida and Broadcom's price-to-earnings ratios of dozens of times, and it is estimated that there is still room for growth of more than 27%.

"24/7 Wall St." analysis pointed out that the demand for AI accelerators continues to exceed TSMC's supply capacity, and profit growth is faster than valuation multiple expansion, making TSMC attractive for investment.

The report mentioned that more than 70% of TSMC’s wafer revenue comes from advanced processes of 7 nanometers and below, and it controls the most valuable key link in the AI ​​supply chain.

TSMC’s management currently expects the U.S. dollar revenue growth rate for 2026 to be approximately 44%. However, affected by the increased initial cost of mass production of the 2-nanometer process, the gross profit margin in the third quarter fell by 1.3 percentage points from the previous quarter to 66.4%, which became the focus of market attention.

Although TSMC's stock price has retreated recently, the market is still optimistic about TSMC's future. The report pointed out that the average target price of Wall Street analysts reached US$584.39. In terms of ratings, 6 gave it a "strong buy", 14 gave it a "buy", and only one gave it a "hold" rating.

TSMC Chairman Wei Zhejia also stated at a recent legal conference that the current market demand still far exceeds the production capacity the company can provide, and hinted that the originally estimated annual compound growth rate of AI accelerator revenue in the mid-to-high 50% range is likely to be higher.

In terms of advanced process layout, TSMC expects that N2 (2nm) production capacity will increase to more than double the current level in 2027, and the A14 process is expected to enter mass production in 2028. 24/7 Wall St.’s optimistic scenario predicts that TSMC’s stock price may reach $536.47 in the next 12 months.

However, TSMC still faces pressure on capital expenditures and gross profit margins. The company reiterated its capital expenditure budget for 2026 at US$60 billion to US$64 billion, and expected capital expenditures from 2026 to 2028 to be significantly higher than the previous three years.

In addition, as more U.S. wafer fab capacity is gradually opened, overseas fabs may expand gross profit margin dilution to 3% to 4%; the geopolitical risks caused by the high concentration of manufacturing capacity in Taiwan are still an important factor when the market evaluates TSMC's value.

The report further compared TSMC with Huida and Broadcom. Huida's latest quarter revenue reached US$96.2 billion (approximately NT$3.1 trillion), an annual increase of 105.85%, but the price-to-earnings ratio was as high as 41 times; Broadcom's AI semiconductor revenue increased by 221% annually, reaching US$16.7 billion (approximately NT$547.3 billion). Although the two companies are growing rapidly, their AI chips still rely on TSMC for OEM production, which means increased shipments of related products will also bring more revenue to TSMC.

24/7 Wall St. finally gave TSMC a target price of US$516.16, with an investment rating of "buy" and a confidence level of 90%. It believes that TSMC's current forward price-to-earnings ratio is about 18 times. Compared with its supply demand that continues to be fully loaded, the valuation is still attractive.

However, the report also pointed out that if capital expenditures of large cloud service companies slow down or tensions around Taiwan increase, it may still put pressure on stock prices.