Investing.con -- Goldman Sachs has increased its 12-month price target for Taiwan Semiconductor Manufacturing (NYSE:TSM) to NT$1,400 from NT$1,355, reflecting optimism about the company’s long-term growth potential.
Following its analyst meeting on January 16, the semiconductor company reiterated a strong outlook driven by AI advancements and raised its long-term revenue CAGR target.
Analysts at Goldman Sachs noted that TSMC raised its five-year revenue CAGR projection in USD terms to approximately 20% for the period 2024–2029, an increase from the previously guided 15–20% for 2021–2026.
AI is cited as a major contributor to this growth, with management projecting that AI revenue will double in 2025.
Furthermore, TSMC provided guidance for a mid-40% CAGR in AI revenue over five years, beginning in 2024.
Goldman Sachs recognizes the strong demand for advanced technologies like N2, driving capital expenditure, projected at $40 billion for 2025
This aligns with TSMC's plans to meet growing customer requirements in both AI and high-performance computing segments.
Despite these positive developments, Goldman Sachs expressed slight disappointment in TSMC's decision to maintain its long-term gross margin guidance at 53% or higher, without increasing it.
Contributing factors include ongoing costs associated with the ramp-up of advanced technologies and overseas fabs in the U.S. and Japan, alongside inflationary pressures.
In addressing investor concerns about geopolitical risks, including potential U.S. export restrictions to mainland China, TSMC's management expressed confidence in mitigating such challenges.
Revenue from mainland China constitutes approximately 10% of the company’s total revenue, and the company is pursuing special permissions to continue serving Chinese customers in AI-related sectors.
Although Goldman Sachs adjusted its 2025 earnings expectations slightly downward due to uncertainties, the firm remains optimistic about TSMC's prospects.
The revised target price reflects a robust belief in TSMC's technological leadership and ability to capitalize on structural industry growth in areas like AI, 5G, and electric vehicles.
Goldman Sachs maintains a "buy" rating on TSMC, placing it on its APAC Conviction List, with a potential upside of 26.7% based on the updated price target.