Morgan Stanley Ranks TSMC as Top Pick Amid Market Sell-Off
In the midst of a significant market selloff, Morgan Stanley has elevated Taiwan Semiconductor Manufacturing Company (TSMC) to its top pick status. The investment bank praises TSMC's quality and defensive nature, which are deemed valuable during a prolonged semiconductor downturn.
Morgan Stanley analysts believe that TSMC's confirmed price hikes and strong AI capital expenditure will act as key catalysts for the company's performance. With the stock trading at 16 times the estimated 2025 earnings per share, the analysts emphasize its attractiveness.
Despite a slow recovery in non-AI sectors, the analysts argue that TSMC's strategic focus on AI demand and capacity expansion justifies its elevated position. The bank reports that TSMC has finalized its 2025 wafer price hikes, with increases expected in AI semiconductor, CoWoS, high-performance computing, and smartphone/consumer prices.
Furthermore, the analysts predict TSMC will achieve over 55% gross margin in 2025, potentially reaching 60% by 2028-2030 as overseas fabs scale up. Discounts for mature node customers facing competition from other foundries are also addressed, with the belief that these discounts could enhance TSMC's utilization and maintain profitability.
Morgan Stanley is optimistic about TSMC's position in the semiconductor market, particularly with its Foundry 2.0 strategy. This strategy includes IDM manufacturing, photomask production, and backend foundry services, which could expand TSMC's total addressable market significantly.
In conclusion, Morgan Stanley sees TSMC as a resilient and lucrative investment amid market volatility, with the potential to deliver strong margins supported by AI semiconductor customers. For investors looking to navigate the current market conditions, TSMC stands out as a promising opportunity for growth and stability.