JP Morgan and Bank of America Merrill Lynch praised Taiwan Semiconductor for its strong growth in August, expecting Q3 revenue to exceed expectations

According to the latest information from Zhitong Finance APP, on Tuesday, Taiwan Semiconductor (TSM.US) announced strong sales performance in August. Morgan Stanley and Bank of America Securities both expressed optimism, believing that this semiconductor giant's third-quarter revenue will exceed expectations.

The latest data shows that Taiwan Semiconductor, which produces chips for global tech giants such as Apple (AAPL.US), NVIDIA (NVDA.US), and AMD (AMD.US), saw a year-on-year sales growth of about 33% in August, reaching 250.87 billion New Taiwan Dollars.

Morgan Stanley stated that Taiwan Semiconductor's revenue in the third quarter so far has reached 68% of Morgan Stanley's expectations. The strong sales in August indicate that the performance of this global chip foundry in the third quarter may exceed its guidance. The firm maintains an "overweight" rating on the stock with a target of 1200 New Taiwan Dollars, while Taiwan Semiconductor's stock price closed at 901 New Taiwan Dollars on Wednesday.

Analysts led by Gokul Hariharan mentioned that due to the growth in iPhone processor sales and strong demand for N3/N5, September revenue may remain stable or slightly increase compared to the previous month.

The analysts believe that due to strong N3 demand and continued demand for N5 from artificial intelligence accelerators and other high-performance computing (HPC) products, Taiwan Semiconductor's third-quarter revenue may slightly exceed the upper end of its guidance range.

Bank of America Securities also expressed a positive view on Taiwan Semiconductor. The firm stated that Taiwan Semiconductor's August revenue, combined with the previous month's performance, has reached 68% of the firm's expectations for the third quarter. Analysts pointed out that Taiwan Semiconductor is likely to meet or exceed expectations for this quarter. The company is also considered attractively valued, with an estimated P/E ratio of 16 times in 2025. The firm reiterated a "buy" rating on Taiwan Semiconductor with a target price of 1200 New Taiwan Dollars.

Bank of America Securities also highlighted the upcoming delivery of the High NA EUV lithography machine from ASML (ASML.US) to Taiwan Semiconductor. This equipment is expected to arrive at Taiwan Semiconductor's global R&D center in Hsinchu, Taiwan later this month, and is expected to enhance the company's ability to develop advanced semiconductor processes.

The acquisition of advanced EUV lithography machines by Taiwan Semiconductor is seen as a positive development in the company's technology roadmap. Analysts believe that this will not have a significant impact on Taiwan Semiconductor's gross margin and cash flow in the short term.

Looking ahead, Morgan Stanley analysts expect Taiwan Semiconductor to achieve a healthy sequential growth of 10% in the fourth quarter as well, thanks to continued demand for iPhone processors and new Android SoCs introduced by Qualcomm (QCOM.US) and MediaTek, which will further drive the rise of N3.

Hariharan and his team remain optimistic about the stock and expect that due to better momentum and price increases, as well as higher N3 yields leading to improved gross margins, the Wall Street consensus for the next 12 months will continue to be revised upwards Intel Chip Outsourcing

Analysts at Morgan Stanley also pointed out in their report that recent media reports suggest that Intel (INTC.US) may outsource all products below 3nm to Taiwan Semiconductor Manufacturing Company (TSMC), but they do not believe this is the case as Intel continues its development path for 18A and 14A.

Moreover, due to the higher position of Lunar Lake in Intel's PC product portfolio, and the recent decision not to increase 20A, this means that Arrow Lake may also heavily rely on TSMC, so the recent share outsourced to TSMC (within Intel's wafer demand range) may indeed be higher.

Analysts believe that the total potential market for Intel's wafer foundry business (TAM) is not large (about $15 billion and stable), and by 2025, TSMC may occupy 30% to 40% of Intel's market share. Therefore, analysts believe that even if Intel were to outsource all its business to TSMC, the opportunity for incremental revenue is unlikely to be that significant