TSMC is set to hold an investor conference this Thursday, the 17th, and foreign investors are already adjusting their target prices ahead of time. Following upgrades from Goldman Sachs, Aletheia, and Haitong International, Nomura and HSBC have also joined in on the trend. Nomura raised its target price by 1.8% to TWD 1355 (approximately USD 191.7), maintaining a “Buy” rating. Meanwhile, HSBC increased its target from TWD 1410 to TWD 1535 (about USD 217.2), marking an 8.8% rise and securing the second-highest price among foreign investors while also keeping its “Buy” rating.
In a recent report, Nomura’s semiconductor industry analyst, Zheng Mingzong, highlighted that AI will continue to be the main driver for TSMC’s fundamentals and valuations, at least until Nvidia’s GB200 undergoes “reality testing.” With non-AI sectors accounting for over 80% of TSMC’s revenue, there is limited downside risk, as supply chain shipments have been relatively cautious and conservative. As a result, a more pronounced cyclical rebound is expected next year.
Zheng anticipates that the accelerated shipment of Nvidia’s Blackwell and mobile chipsets will support TSMC’s 5/4/3 nm capacity, boosting growth momentum for the fourth quarter. Starting in Q1 of next year, he expects an average price increase of 5% to 10% for 5/4/3 nm processes and CoWoS (Chip-on-Wafer-on-Substrate). The expansion of AI CoWoS capacity and potential outsourcing opportunities from Intel could lead to a projected 24% year-over-year increase in TSMC’s USD revenue by 2025, supporting a gross margin that exceeds 55% as the new norm.
Zheng maintains his earlier estimates from August, projecting that after TSMC acquires the Nanke Plant 4 from Innolux, CoWoS capacity is expected to rise from approximately 35,000 wafers per month by year’s end to 60,000-70,000 wafers by the end of next year, potentially reaching 90,000-100,000 wafers by the end of 2026. He also estimates TSMC’s capital expenditures will reach USD 32 billion this year, growing to USD 38 billion by 2025.
Moreover, Zheng has revised TSMC’s revenue and profit forecasts for 2024 to 2026. For 2025, the estimated earnings per share have been adjusted from TWD 55.56 to TWD 56.48, and he continues to apply a 24x price-to-earnings ratio, resulting in a target price of TWD 1355.
HSBC’s head of Asian technology research, Li Yijia, has also upgraded TSMC’s target price from TWD 1410 to TWD 1535, noting three major positive factors. Firstly, the operational performance has exceeded expectations. Secondly, capital expenditures continue to expand, with projections of USD 32 billion in 2024 and between USD 36.5 billion and USD 39 billion in 2025, representing a 22% year-over-year increase. Lastly, advancements in the 2 nm process are expected to drive consistent profit growth over the next two years.
