semiconductor

Taiwan Semiconductor Stock Scores a Street-High Price Target on $90B AI Revenue Forecast

desk 1 July 2025

Engineer in Sterile Coverall Holds Microchip with Gloves and Examines it by Gorodenkoff via Shutterstock

Taiwan Semiconductor Manufacturing Company (TSM), also known as TSMC, is in the spotlight this Tuesday after a bullish analyst backed the company’s outlook for $90 billion in artificial intelligence (AI) revenue this decade.

“Using TSMC’s publicly stated AI revenue target (~$90B by 2029) and AI accelerator outlook (~50MM units by 2030), we developed our AI wafer demand model and found that TSMC doesn’t need much unit volume growth (counted in package) to reach the target,” wrote Needham analyst Charles Shi in a note this morning. “Significant silicon content growth from increasing number of compute dies in a package and the transition to custom HBM base dies should sustain the rapid AI revenue growth to ~$90B within four years.”

Shi raised his price target on TSM stock to $270 from $225, and reiterated a “Buy” rating. That represents a new Street-high price target for TSM. Despite the optimistic note, Taiwan Semi stock has dropped about 1% today. The shares are retreating after setting a new high of $228.88 in late June, which briefly carried TSM into a short-term overbought condition, based on the 14-day Relative Strength Index (RSI).

TSM has demonstrated exceptional momentum in 2025, with its stock appreciating approximately 14.9% year-to-date, primarily driven by surging demand for AI chips and advanced semiconductor manufacturing. The company’s first-quarter performance was remarkable, as revenue of $25.5 billion was up 42% year-over-year, while net income surged 60% to $11 billion. TSMC maintains healthy operating margins around 48-49%, reflecting its operational efficiency and pricing power in the market.

The company’s dominant position in the semiconductor industry remains unchallenged, controlling approximately 67% of the foundry market and an impressive 90% of advanced chip production. This market leadership is further strengthened by TSMC’s critical role in the AI supply chain, serving key customers like Nvidia (NVDA), Apple (AAPL), and Advanced Micro Devices (AMD). Taiwan Semi’s HBM3E memory solution has been selected by both Nvidia for its Blackwell GPUs and AMD for its upcoming MI355X GPUs, solidifying its position in the growing AI accelerator market.

Management’s outlook remains robust, with second-quarter revenue projected between $28.4-29.2 billion, representing 38% growth at the midpoint. The company maintains a long-term gross margin target above 53% and projects a compound annual growth rate of 20% over the next five years. TSMC’s strategic expansion includes significant investments globally, with $165 billion allocated for U.S. facilities and new operations in Japan and Germany, demonstrating its commitment to geographical diversification.

In today’s note, Needham analyst Shi warned, “We see potential deceleration of TSMC AI revenue into 2026, due to AI accelerator unit volume decel and the lack of silicon content growth in Nvidia Rubin.” However, he added, “we forecast TSMC’s AI revenue will at least grow at a decent 20% YoY next year. Looking ahead, we see significant growth acceleration to nearly 40% YoY in ’27 and 45% YoY in ’28, as silicon content growth resumes with Rubin Ultra and Feynman.”

Despite trading near all-time highs, TSM is valued at a reasonable 24 times forward adjusted earnings, suggesting potential upside given its growth trajectory and market position. The company’s advanced manufacturing capabilities, particularly in CoWoS technology, continue to attract demand beyond AI applications into smartphones, servers, and networking.

While concerns include lingering geopolitical risks, particularly regarding U.S.-China tensions and Taiwan’s security situation, TSMC’s essential role in global semiconductor production and ongoing diversification efforts help mitigate these risks.

In the short term, investors should be aware that TSM is scheduled to report earnings on July 17, which is likely to generate some event-related volatility in the share price in the weeks ahead.

This article was generated with the support of AI and reviewed by an editor. On the date of publication, the editor had a position in: NVDA, AAPL, AMD. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com