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On Friday, Bernstein analysts provided insights into the recent performance of Intel (NASDAQ:INTC) and TSMC stocks, following reports of the Trump administration's proposals to support TSMC and advance a "Made in America" semiconductor agenda. Intel shares have seen a significant rise, nearly 30%, attributed to the administration's efforts to bolster the domestic semiconductor industry. TSMC, with its impressive $862 billion market capitalization and "GREAT" financial health score according to InvestingPro, continues to dominate the semiconductor manufacturing landscape with a robust 56% gross profit margin.
The Trump administration's proposals include the possibility of TSMC constructing a U.S.-based advanced packaging plant and potentially investing in Intel's manufacturing operations, which may involve technology transfers. The third option suggests TSMC could allow Intel to manage additional packaging orders from U.S.-based customers. According to InvestingPro data, TSMC's strong financial position, evidenced by its healthy 2.44 current ratio and minimal debt-to-capital ratio of just 3%, suggests it has the financial flexibility to pursue such strategic initiatives.
While the first and third options appear feasible, with the construction of a packaging plant being relatively straightforward, Bernstein analysts express concerns about the economic implications, such as cost and margin pressures. The advanced packaging partnership between TSMC and Amkor (NASDAQ:AMKR) could also be a point of contention, though it is believed that TSMC may find the arrangement with Intel acceptable.
The second proposal, involving a joint venture and investment in Intel, raises questions about the willingness of TSMC to share its process technology and intellectual property with a direct competitor. The terms of such an agreement would likely be based on existing strategic co-investment platforms (SCIPs), which have stringent conditions due to the associated risks.
The analysts also speculate on the potential incentives or pressures the Trump administration might offer or apply to TSMC in exchange for its cooperation, including tariff threats. In 2024, Taiwan was the second-largest source of semiconductor imports into the U.S., a significant but not dominant portion of the $625 billion industry.
The possibility of using Taiwan's status as a bargaining chip is mentioned, but the analysts caution that such an aggressive stance could have negative repercussions for the U.S.'s reputation as a reliable ally.
Bernstein suggests that a more straightforward approach would be for the U.S. to encourage TSMC to expand its capacity within the country. This would involve less risk than attempting to rescue Intel and would likely result in TSMC promising to locate more advanced technologies in the U.S. in exchange for further governmental support.
In conclusion, Bernstein rates Intel as "Market-Perform" with a price target of $25. TSMC is rated as "Outperform" with a price target of NT$1380. This aligns with the broader analyst consensus on InvestingPro, where TSMC maintains a strong buy rating of 1.33, supported by impressive revenue growth of 34% over the last twelve months. The analysis reflects the complexity of the situation and the uncertainty surrounding the Trump administration's negotiation strategies with TSMC. For deeper insights into TSMC's valuation and growth prospects, investors can access the comprehensive Pro Research Report, which provides detailed analysis of the company's financial health and future potential.
In other recent news, the European Commission President Ursula von der Leyen announced the InvestAI initiative, aiming to mobilize €200 billion for AI development in Europe. The initiative includes a new €20 billion European fund for AI gigafactories, aiming to establish Europe as a primary hub for AI. Concurrently, Taiwan Semiconductor Manufacturing Company (TSMC) continues to receive positive outlooks from financial analysts due to its significant role in the AI sector. Citi maintains a positive stance on TSMC, emphasizing the company's crucial role in advancing AI technologies.
Similarly, Bernstein reiterated an Outperform rating on TSMC, highlighting the company's strong position in the data-center AI sector. Goldman Sachs also increased the price target for TSMC shares, maintaining a Conviction Buy rating. This adjustment followed TSMC's updated financial targets, which attribute AI as a primary driver for anticipated incremental revenue growth. Lastly, JPMorgan reiterated an Overweight rating on TSMC, outlining three key drivers, including strong revenue growth from Generation AI technologies. These developments highlight the growing significance of AI in the global economy and the strategic positioning of companies like TSMC in this evolving landscape.
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