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Investing.com -- Morgan Stanley (NYSE:MS) is urging investors to buy Taiwan Semiconductor (TW:2330) (NYSE:TSM) (TSMC) shares ahead of its second-quarter earnings release on July 17, as the Wall Street bank expects the chipmaker to raise its full-year revenue guidance on the back of strong AI demand.
In its Sunday note, the bank points to TSMC’s preliminary second-quarter revenue of NT$933 billion, which implies a 16% quarter-on-quarter increase in U.S. dollar terms—beating both company guidance and Morgan Stanley’s own estimate.
Morgan Stanley notes that “the likelihood of full-year revenue raise is now higher,” adding that 27% year-on-year revenue growth in 2025 appears “quite achievable.”
The bank sees further support from resilient utilization rates, despite lukewarm PC and smartphone demand.
“Some 3nm PC CPU order cuts were quickly replaced by crypto mining demand,” analysts led by Charlie Chan said. This indicates customers are pulling in orders before a planned wafer price hike in 2026.
TSMC is also viewed as well-positioned in the event of new semiconductor tariffs, thanks to its growing U.S. investment footprint.
“We maintain our view that TSMC’s commitment to the US$165bn investment in the U.S. fab should increase its chances of receiving an exemption,” the analysts wrote.
Additionally, the company’s valuation is seen as appealing. TSMC trades at 17x Morgan Stanley’s 2026 estimated earnings, with a price target of NT$1,288 implying 17% upside.
“We recommend buying into the print given our expectation of upward revenue revisions,” the analysts said.
TSMC remains a top pick for Morgan Stanley, supported by sustainable AI semiconductor demand, expected margin expansion, and the chip manufacturer’s dominant position in advanced foundry services.
The Wall Street firm has also upgraded its industry view to Attractive ahead of earnings season, highlighting TSMC’s upcoming call as a key indicator for the broader semiconductor sector.