Bernstein analysts have projected a strong growth trajectory for Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading chip manufacturer, driven by surging demand in AI data centers and premium smartphones.
According to Bernstein analysts, Taiwan Semiconductor Manufacturing Company (NYSE: TSM), the largest chipmaker globally and a pivotal player in the booming AI sector, is positioned for substantial growth.
The investment firm forecasts a 26% revenue increase and a 29% rise in earnings per share (EPS) for TSMC this year, with this upward trend expected to continue through 2025 and beyond. The anticipated growth is largely attributed to the high demand from AI-driven data centers and cutting-edge smartphones, which are leveraging TSMC’s advanced N3 and N4/5 nodes.
Bernstein notes that TSMC’s production capacity for these advanced nodes is fully utilized and will likely remain so until 2025, despite a slower recovery in older technology nodes. Additionally, the rapid expansion of TSMC’s CoWoS (Chip on Wafer on Substrate) services is significantly boosting the company’s advanced packaging revenue. Coupled with a favorable foreign exchange environment, this expansion is expected to drive TSMC’s revenue growth in Taiwan dollars to 30% for the year.
Looking forward, Bernstein expects TSMC’s growth momentum to persist into 2025 and 2026, with projected EPS increases of 30% and 19%, respectively. The continuous surge in AI demand from data centers, along with Intel’s growing reliance on TSMC for outsourced production, is expected to fuel this growth. Furthermore, TSMC plans to implement a 5-10% price increase for its N3 and N4/5 nodes starting in early 2025, contributing further to its revenue growth.
Bernstein analysts emphasize that “the revenue growth of N3 is likely to outpace that of N4/5.” They also suggest that while there will be a transition to N3, the resilience of N4/5 nodes will remain stronger compared to previous technology generations.
Regarding profit margins, the analysts expect a gradual recovery due to the sustained utilization of older nodes, with the margin drag from N3 technology being less significant. While overseas fabs might dilute margins by 2-3%, overall margins are still expected to show modest improvement year-over-year.
For 2026, Bernstein acknowledges potential challenges, such as Intel (NASDAQ: INTC) reducing outsourcing at its Panther Lake facility. However, the firm believes that AMD (NASDAQ: AMD) and Arm-based CPUs from Qualcomm (NASDAQ: QCOM) and MediaTek will continue to capitalize on TSMC’s advanced technology, offsetting the impact and gaining market share from Intel.
Furthermore, AMD’s early adoption of TSMC’s N2 technology is expected to enhance performance with less margin pressure compared to N3.
Bernstein projects that TSMC’s revenue and EPS will grow by 24% and 30%, respectively, in 2025. Although growth may slow in 2026, the company is still anticipated to achieve a 15% increase in revenue and a 19% rise in EPS.
The firm maintains an “Outperform” rating on TSMC, highlighting that the stock remains attractively valued, particularly given TSMC’s ability to navigate potential economic downturns more effectively than its competitors.
Bernstein has set a price target of NT$1,185 for TSMC shares, reflecting a potential 24% upside, including a 2% dividend yield.
