TSMC stock target lifted at Bernstein on better AI outlook

Investing.com -- Bernstein raised its price target on Taiwan Semiconductor Manufacturing Co. to NT$1,444 from NT$1,260, citing stronger-than-expected artificial intelligence demand and early signs of recovery in non-AI markets.

Analysts forecast TSMC’s revenue to grow 33% in dollar terms this year, topping the company’s 30% guidance.

“We actually argue our projection [is] already conservative as we assume 4Q25 to have unusually low seasonality,” they wrote.

Growth of 17% is expected in 2026, underpinned by record-high Information and Communication Technology (ICT) exports from Taiwan to the U.S. and the ramp-up of Blackwell Ultra AI servers.

Bernstein expects AI to more than double its share of TSMC’s revenue this year, rising from the mid-teens percentage last year to the low-20s. TSMC’s total revenue is also expected to increase by one-third during this period, the firm said.

Non-AI demand has also shown improvement, with tariff-related pull-forward adding to momentum in standard products. While higher tariffs could eventually dampen end demand, the current extensions of grace periods are seen delaying any impact until 2026.

Bernstein raised its capital expenditure forecasts for 2026 and 2027 on higher capital intensity and TSMC’s U.S. expansion, though still below consensus thanks to equipment reuse.

“TSMC [is] leveraging N7 equipment for some production steps of N5 as an example to keep its capex in check,” analyst Mark Li wrote. Capex is projected to rise by about one-third this year and continue climbing into 2026.

Pricing power is set to help offset investment needs and foreign exchange headwinds, Li said. TSMC plans 5% to 10% price hikes for its N5, N4 and N3 nodes from early 2026, with mobile customers facing the lower end and high-performance computing customers nearer the upper end.

Prices for next-generation nodes such as N2 and A16 are also expected to be set at premium levels.

U.S. capacity is becoming more valuable under the tariff regime, with the premium for Arizona-made chips seen widening from today’s 10–15% to the mid-teens or above.

Bernstein also touched on concerns over competition. Li noted that Intel’s 18A process is progressing slower than planned, leaving the company dependent on TSMC for around 10% of its revenue contribution this year and next.

“We honestly view all these as noises & advise investors to focus on fundamentals,” he said, adding that TSMC’s cost and execution advantages will preserve its foundry leadership.

Bernstein forecasts TSMC’s earnings per share (EPS) to jump 35% this year and then grow at a compound annual rate of 23% through 2027.

Gross margin is projected to ease slightly from nearly 59% in the first half of 2025 to about 57% in 2026 and 2027.

With a 19x forward price-to-earnings multiple, which implies a 20% discount to the SOX index, Li sees TSMC’s valuation as attractive.