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On Monday, Bernstein analysts maintained an Outperform rating and a $251.00 price target for Taiwan Semiconductor Manufacturing Company (NYSE:TSM) shares, the $753.3 billion semiconductor giant with a "GREAT" InvestingPro Financial Health score. The firm’s analysis focused on the potential outcomes of TSMC’s $165 billion investment in U.S. manufacturing capabilities. Bernstein’s report explores the extent of geographic diversification, U.S. self-sufficiency in semiconductor production, and the impact on TSMC’s profit margins that this investment might entail.
Bernstein’s analysis suggests that TSMC’s significant investment could result in approximately 25-30% of the company’s total revenue being generated in the U.S. by the early 2030s. The company has demonstrated strong execution capability, with impressive revenue growth of 33.89% over the last twelve months. InvestingPro analysis reveals over 20 additional key performance indicators that could help investors better understand TSMC’s growth trajectory. This would also mean that around a third of TSMC’s production could be located outside of Taiwan. From the perspective of the U.S. government and domestic customers, the investment is projected to meet about 40-50% of their needs for leading-edge semiconductor production on American soil during the same timeframe.
Despite the benefits of diversification and supporting U.S. semiconductor self-sufficiency, Bernstein acknowledges that the investment is not without costs for TSMC. Specifically, there could be a margin drag for the company, although the exact impact remains difficult to quantify. Currently, TSMC maintains a robust gross profit margin of 56.12%, demonstrating strong operational efficiency. Bernstein’s sensitivity analysis indicates challenges in keeping the gross margin drag within 2-3%. The report also notes TSMC’s historical reluctance to build U.S. fabrication plants (fabs), linking it to the potential margin impact.
The analysis includes assumptions that TSMC will speed up capacity expansion and technology transitions in the U.S., while still maintaining a flexible investment strategy. This approach might involve investing around half of the $100 billion during former President Trump’s term, with the goal of keeping Taiwan slightly ahead in technology.
Additionally, Bernstein’s report does not quantify the effects of the two advanced packaging fabs TSMC plans to construct in the U.S. However, with an estimated capital expenditure of nearly $20 billion out of the total $165 billion investment, the U.S. is expected to have sufficient advanced packaging capacity to support a complete artificial intelligence production base domestically. With analyst price targets ranging from $180 to $273 and a consensus Strong Buy rating, TSMC’s strategic investments appear well-positioned. For comprehensive analysis including Fair Value estimates and detailed financial metrics, check out the full TSMC research report on InvestingPro.
In other recent news, Taiwan Semiconductor Manufacturing Company (TSMC) has been the focus of significant investor interest due to its financial performance and strategic plans. TSMC reported February revenue of NT$260 billion, reflecting a 43% increase year-over-year, although it was down 11% from the previous month. This positions the company to potentially exceed its first-quarter revenue guidance, despite disruptions from a January earthquake. On the strategic front, TSMC announced a substantial $100 billion investment in the United States, which includes constructing new fabrication plants and a research center. This move aims to mitigate risks related to potential semiconductor tariffs and concerns about involvement with Intel (NASDAQ:INTC)’s operations.
Analysts from BofA Securities, Bernstein, and JPMorgan have maintained positive outlooks on TSMC, with price targets of $265, $251, and TWD1,500, respectively. BofA Securities highlighted the company’s plans to address investor concerns about gross profit margins and capacity planning. Meanwhile, JPMorgan emphasized the strategic importance of TSMC’s expansion in the U.S. as a favorable step in navigating industry challenges. These developments underscore TSMC’s ongoing efforts to maintain its leadership in the semiconductor industry amid global uncertainties.
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