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On Tuesday, Stifel analysts revised their expectations for Taiwan Semiconductor Manufacturing Company (NYSE:TSM), a semiconductor giant with a $709 billion market capitalization and impressive 34% revenue growth over the last twelve months, predicting the company will spend at or below the lower end of its 2025 capital expenditure (capex) budget. According to InvestingPro data, the company maintains a "GREAT" financial health score, suggesting strong fundamentals despite the cautious capex outlook. This adjustment comes as TSMC, a critical player in the semiconductor industry, continues to navigate the manufacturing of advanced computing chips used in data centers, consumer electronics, and the auto/industrial sectors.
TSMC had previously indicated that growth in the semiconductor industry, excluding memory, could rise by more than 10% year-over-year in 2025. While the company’s own revenue is forecast to grow by 27% in 2025, Stifel suggests that while there are short-term exemptions from semi/hardware tariffs, which may lead to some expedited wafer orders, there is also significant uncertainty surrounding end demand. Based on InvestingPro’s Fair Value analysis, TSMC currently appears slightly undervalued, presenting a potential opportunity for long-term investors. This uncertainty could result in a pushback of future orders, impacting the industry in the near term.
Stifel’s report also points to a potential slowdown in TSMC’s aggressive expansion plans for its 2nm GateAll-Around technology, specifically in its Fabs 20 and 22. While the market expected a ramp-up to 50,000 wafers per month (WSPM) by the end of 2025, Stifel now believes the actual figure could fall short by 10,000 to 20,000 WSPM. Factors contributing to this revision include reduced PC demand, possible insourcing by Intel (NASDAQ:INTC) for its Panther Lake processors in the second half of 2025, delayed Blackwell projects, and a shift in iPhone/Android 2nm adoption to the second half of 2026.
Looking beyond the current year, Stifel acknowledges a potential positive aspect, suggesting that the slower pace this year might result in more significant 2nm capacity growth earmarked for 2026. However, in the short term, they anticipate some impact on the semiconductor equipment sector, particularly in the latter half of this year. Consequently, Stifel has lowered its estimates for wafer fabrication equipment original equipment manufacturers (OEMs) such as Applied Materials (NASDAQ:AMAT) and Onto Innovation (NYSE:ONTO), where they previously modeled higher growth in the second half compared to the first half of the year.
Additionally, Stifel has reduced its price targets for KLA Corporation (NASDAQ:KLAC) and Lam Research Corporation (NASDAQ:LRCX) to reflect the contraction in technology market multiples. This revision underscores the broader implications of TSMC’s tempered capex spending and expansion plans on the semiconductor industry’s equipment providers. With TSMC’s next earnings report due on April 17, 2025, investors can access comprehensive analysis and additional insights through InvestingPro’s detailed Research Report, which provides deep-dive analysis of the company’s financials, valuation metrics, and growth prospects.
In other recent news, Taiwan Semiconductor Manufacturing Company (TSMC) reported first-quarter revenue for 2025 that exceeded consensus estimates, achieving a total of NT$839 billion. This figure represents a 42% increase compared to the same period last year, despite earlier concerns about potential revenue constraints due to a January earthquake. Meanwhile, JPMorgan revised its price target for TSMC shares to NT$1,300, citing a more cautious revenue outlook for the fiscal year 2025 due to tariffs and a global economic slowdown. The firm still expects a healthy second quarter in 2025, with projected growth driven by strong demand for advanced technologies.
Bernstein analysts maintained their Outperform rating on TSMC, with a price target of $251, highlighting the company’s strong performance and potential for future demand surges. On the other hand, Citi analysts lowered TSMC’s price target to TWD1,050 while maintaining a Buy rating, reflecting concerns about tariffs and global economic conditions. Citi emphasized TSMC’s leading-edge technology as a strength, although it noted potential risks to the company’s revenue guidance and long-term growth rate.
Additionally, Taiwan’s government activated a $15 billion stock stabilization fund in response to significant market declines following new U.S. tariffs. The fund aims to stabilize the market amid heightened volatility and a sell-off attributed to the tariffs. This development underscores the broader economic challenges facing TSMC and the semiconductor industry as a whole.
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