Wall Street remains optimistic about Taiwan Semiconductor in 2025: Strong demand for AI and high-performance computers, recovery in consumer electronics demand

The demand for AI chips has exploded, and the high-performance computing market is booming. In 2025, can Taiwan Semiconductor continue to maintain its king status in the chip foundry industry?

Morgan Stanley analyst Charlie Chan expects that due to the seasonal impact of the iPhone, Taiwan Semiconductor's revenue in the first quarter will decline by 5% compared to the previous three months, and believes that the company's performance guidance for 2025 will be relatively conservative, then exceed expectations.

"It is expected that Taiwan Semiconductor's sales growth forecast for 2025 is set in the low range of 20% year-on-year, while the market generally expects the high range of 20%. Taiwan Semiconductor usually gives conservative expectations at the beginning of the year and then exceeds expectations."

Goldman Sachs expects that in the first quarter of 2025, Taiwan Semiconductor's revenue will only decline by 2.2% quarter-on-quarter, and the full-year revenue in 2025 will achieve a year-on-year growth of 26.8%, making it one of the more optimistic large investment banks.

UBS has adjusted its sales estimate for Taiwan Semiconductor in the first quarter of 2025 to a quarter-on-quarter decline of 6%, down from a previous expectation of an 8% decline, and stated that with strong demand for high-performance computing (HPC) and cloud AI, Taiwan Semiconductor's revenue in 2025 is expected to achieve a significant growth of 25%.

Goldman Sachs: Taiwan Semiconductor's revenue may grow by 26.8% in 2025, driven by advanced processes and AI demand

Goldman Sachs expects Taiwan Semiconductor to continue to maintain strong growth momentum.

In a research report released on the 3rd, Goldman Sachs predicts that Taiwan Semiconductor's revenue will reach a new historical high in 2025, achieving a year-on-year growth of 26.8%, reaching NT$418 billion, with revenue in 2024 at NT$363.7 billion. This growth is primarily driven by advanced process technology and strong demand for artificial intelligence.

The report points out that the price increases of advanced process (such as 3nm and 5nm) products and CoWoS (Chip on Wafer Substrate packaging technology) will significantly enhance Taiwan Semiconductor's profitability. It is expected that the gross margin will increase from 56.1% in 2024 to 59.3% in 2025.

"Samsung and Intel face challenges in advanced processes, therefore we predict that prices at the 3nm/5nm nodes will rise in the mid-to-high single-digit percentage range, while the price increase for CoWoS technology is expected to exceed 10%."

Although the first quarter is traditionally a slow season for the semiconductor industry, the report predicts that Taiwan Semiconductor's revenue in the first quarter of 2025 will only decline by 2.2% quarter-on-quarter, far better than the average decline of 5% over the past decade. At the same time, the gross margin is expected to remain at a high level of 58.9%.

Goldman Sachs stated that Taiwan Semiconductor may adjust its long-term growth targets at the upcoming analyst meeting. Currently, the company's management expects a compound annual growth rate (CAGR) of revenue from 2021 to 2026 to be 15%-20%. Given the favorable market outlook, this target is expected to continue for the next five years.

Regarding market concerns about Taiwan Semiconductor's expansion plans in the United States, the report points out that the second and third planned wafer fabs in the U.S. are expected to start mass production in 2028 and 2030, respectively. Management may update relevant progress at the analyst meeting Goldman Sachs raised TSMC's target price, increasing it from NT$1,320 to NT$1,355 within 12 months. As of the time of publication, TSMC's stock price was NT$1,125 per share.

UBS: TSMC's revenue is expected to grow by 25% in 2025, with HPC and cloud AI as the main drivers

In a research report released on the 6th, UBS pointed out that driven by strong demand for high-performance computing and cloud AI, TSMC's revenue is expected to achieve a significant growth of 25% in 2025, reaching NT$3,611.2 billion.

"The main driving force behind revenue growth comes from the HPC sector, while mobile and consumer products may see accelerated growth due to inventory management and pre-stockpiling ahead of trade tariffs."

UBS expects TSMC to announce its full-year revenue for 2024, estimated at NT$2,881.5 billion, during the earnings call for the fourth quarter of fiscal year 2024 on January 16.

In terms of profitability, UBS predicts that TSMC's full-year gross margin will reach 58.5% in 2025, up from 56.0% in 2024; and expects the gross margin in the second half of 2025 to gradually improve to 59%-60%.

The report also analyzed the key driving factors for TSMC's future growth:

• HPC Business: TSMC's HPC revenue is expected to reach USD 6.27 billion in 2025, a substantial increase of 44.4% compared to USD 4.34 billion in 2024, with market share rising from 68.6% in 2024 to 76.6% in 2025.
• Mobile Business: Mobile product revenue is expected to reach USD 3.37 billion in 2025, a year-on-year increase of 10%, with market share rising from 77.9% in 2024 to 79.8%.
• Cloud AI Outlook: To meet the strong demand in the cloud computing and AI markets, TSMC plans to double its CoWoS (advanced packaging technology) capacity to 80k WPM by the fourth quarter of 2025.
• Diversification of Customer Base: Apple's sales contribution is expected to decrease from 23% in 2024 to 20% in 2025, while NVIDIA's contribution is expected to rise to 17%, and Intel is expected to contribute 9%-10%, leading to a more diversified customer structure.

UBS expects that U.S. trade tariffs in 2026 may impact technology demand and the semiconductor cycle. TSMC is building fabs in the U.S. and Japan, but the initial profitability of overseas factories may be limited