Bernstein Reaffirms Outperform on TSM, $249 PT Amid Rising Capex Trends
The firm's analysis is a reflection of TSMC's significant position in the semiconductor equipment market.
Investors are paying close attention to TSM's spending plans as they impact semiconductor equipment stocks, the broader chip industry, and AI. Bernstein noted that a substantial portion of TSMC's capital expenditure is allocated to infrastructure and non-wafer-based equipment, such as packaging and testing technologies.
The firm also noted how WFE-to-semiconductor ratio remains elevated due to on shoring trends and technological complexity. Recent data illustrates that capital expenditure per wafer is also rising more rapidly than previously anticipated.
Moreover, TSMC's spending is deflationary while China's is inflationary. With the US pushing companies to bring production back home, it is unclear whether it will be as aggressive as China.
'TSMC is 15-25% of the global wafer fab equipment (WFE) market, but China is 30-40%, as a sizable part of TSMCs capex is for infrastructure & non-wafer-based equipment (e.g. for packaging & testing). 15-25% is consistent with TSMC being10-20% of their total revenue disclosed by AMAT & TEL & 30-40% by ASML. Technology complexity & onshoring trend will keep the overall WFE/semi ratio elevated if not higher. Recent data suggests capex per wafer is rising more rapidly than we thought. More importantly TSMCs deflationary but China is inflationary & much bigger. The US uses tariffs, etc. to push onshoring capacity but also grants exemptions. This motivates companies/countries to over-promise & under-deliver. Time will tell if the US will be as forceful as China to make the US as meaningful to WFE.'
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) manufactures and sells advanced chips used in artificial intelligence applications.
While we acknowledge the potential of TSM as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
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