Nomura raises TSMC's target price to NT$2,280, reiterates "Buy" rating

Nomura published a research report indicating that Taiwan Semiconductor (TSM.US) has provided revenue guidance for the first quarter of this year that exceeds market expectations, and holds an optimistic outlook on the gross margin for the fourth quarter of last year and the first quarter of this year. Additionally, the company forecasts a revenue growth of approximately 30% in US dollars this year and has raised the compound annual growth rate for revenue from 2024 to 2029 to about 25%, with long-term gross margin expectations reaching over 56%. However, Taiwan Semiconductor's capital expenditure budget for this year is between $52 billion and $56 billion, higher than the bank's previous forecast. Considering the time from construction to operation, the bank believes this highlights the company's confidence in structural AI demand from 2028 to 2029.

Nomura has raised its capital expenditure forecast for Taiwan Semiconductor for 2026 to 2027 to $54 billion and $63 billion, respectively, as the company increases its investments, expecting further upside in CoWoS supply in 2027. Given Taiwan Semiconductor's strategy of outsourcing most of its WoS processes, professional packaging and testing foundries (OSAT) should also see business upside potential.

Taking into account Taiwan Semiconductor's updated earnings guidance and operational leverage improvement, the bank has raised its earnings per share estimates for 2026 and 2027 by 7% and 4%, respectively. The target price for Taiwan Semiconductor (2330.TW) has been raised from NT$2,135 to NT$2,280, reiterating a "Buy" rating