With the financial reports of Micron and Samsung failing to drive the semiconductor sector's rally, current investors are pinning their hopes on Taiwan Semiconductor Manufacturing Company (TSMC), which is set to hold an investor conference on July 16. They hope that TSMC will release positive news to lift the market out of its gloom.

However, while investors are still eagerly anticipating, foreign capital has already begun to initiate a wave of target price upgrades. Recently, Citigroup (Citi) significantly raised TSMC's target price to NT$3,800 in a report, indicating that in the most optimistic scenario, it could challenge the NT$4,000 mark, setting a record high among foreign investors.

At the same time, Aletheia Capital has set a target of NT$3,500, while UBS, Nomura, Macquarie, and Crédit Lyonnais have also adjusted their target prices to around NT$3,300 to NT$3,400. This wave of upgrades reflects foreign investors' strong confidence in the continued explosion of AI demand and TSMC's unshakeable dominance in the foundry and advanced packaging sectors.

In the face of market noise generated by the AI sector, the main reason foreign investors are optimistic about TSMC is that the development cycle of AI has entered a new phase. The Citi report points out that this wave of AI enthusiasm is becoming broader and more enduring, with demand spilling over from single AI graphics processing units (GPUs) to customized AI chips (ASICs), cloud TPUs, networking chips, optical interconnect components, and central processing units (CPUs). This means that the future development of AI will no longer overly rely on a single product line, a single customer, or a single data center's expenditure, thus providing TSMC, which holds a significant share of the global advanced process market, with more robust long-term growth momentum.

Foreign reports generally indicate that benefiting from comprehensive chip demand, TSMC's 2-nanometer (N2) and 3-nanometer (N3) advanced processes remain fully loaded. Moreover, Citi expects that as demand strengthens, the price increase trend for TSMC's foundry services will continue until 2027, granting TSMC strong "pricing power." Even when facing significantly increased depreciation costs due to new capacity investments in the future, TSMC can still effectively support and maintain its excellent gross margin performance. Additionally, economies of scale are also an important weapon for TSMC, with its leading node combined capacity expected to reach 350,000 to 400,000 wafers per month by the end of 2028, providing customers with unparalleled confidence.

In addition to wafer manufacturing capacity, advanced packaging technology is playing an increasingly critical role in TSMC's market value story. This is because current AI chips are extremely complex and need to be packaged with high-bandwidth memory (HBM) and other components to achieve rapid data transmission, making packaging capacity nearly as important as wafer capacity. Relevant foreign reports indicate that TSMC's advantage is not just in process leadership but in the combination of top-notch manufacturing scale and advanced packaging leadership. Investors are now more focused on whether TSMC can provide AI customers with the packaging scale and long-term supply assurance needed in the next wave of expenditures.

Looking ahead to the second half of the year, market visibility is expected to be extremely high. Investors are highly concerned about whether TSMC will further raise its full-year revenue growth target, 2026 revenue growth outlook, and long-term revenue compound annual growth rate at the investor conference on the 16th. Additionally, adjustments to "capital expenditures" are also a key focus, with market rumors suggesting that capital expenditure estimates may be raised to between US$75 billion and US$80 billion In addition, UBS has also raised its capital expenditure forecasts for 2026 to 2028, believing that expanding investments will help alleviate customer concerns about supply constraints.

Overall, TSMC's recent stock price has fluctuated around the 52-week high of approximately NT$2,440 to NT$2,500, but there is relatively strong support on the downside. With the upcoming earnings call, it is expected that the latest data and medium to long-term outlook released by TSMC will not only affect its own stock price performance but also become the most important barometer for judging whether global AI demand continues to heat up and the future direction of the overall AI supply chain.

(Source of the first image: TSMC)