Key insights
- Citigroup raised its price target for TSMC, citing an accelerating AI megacycle. Upgraded earnings estimates through 2028 are significantly above consensus. The report highlights strong growth in TSMC's net profit and revenue, driven by AI-related demand and advanced node technologies. Nvidia, Google, and AWS are expected to be key customers. This bullish outlook on TSMC, a major supplier to US tech companies, suggests continued strength in the AI and semiconductor sectors, indirectly benefiting US equities.
Investing.com -- Citigroup raised its price target on Taiwan Semiconductor Manufacturing Co. to NT$2,800 from NT$2,600, reiterating a “buy” rating after upgrading earnings estimates through 2028 on accelerating AI-driven chip demand.
The new target implies a 53.8% share price return from TSMC’s March 27 closing price of NT$1,820, with a total expected return of 55.3% including dividends.
Citi’s 2027 and 2028 earnings per share estimates of NT$130.72 and NT$165.99 stand 18% and 28% above Bloomberg consensus, respectively.
Citi projects TSMC’s net profit rising from NT$1.72 trillion in 2025 to NT$2.43 trillion in 2026, NT$3.39 trillion in 2027, and NT$4.30 trillion in 2028, implying growth of 41.5%, 39.5%, and 27% in each year.
Revenue is forecast at NT$5.12 trillion, NT$6.95 trillion, and NT$8.66 trillion over those years, running 2.2%, 12%, and 17.7% above consensus.
Gross margin is projected to expand to 63.7% in 2026, 64.7% in 2027, and 65.6% in 2028, against a consensus of 63.2%, 62.7%, and 61.8%, Citi said.
Against TSMC’s 2026 capex guidance of US$52-56 billion, Citi now projects US$67 billion in 2027 and US$75 billion or higher in 2028, up from a prior 2027 estimate of US$60 billion, with capex intensity held at around 30% of revenue.
N3 and N2 capacity is projected to grow 30-40% and over 100% year-on-year in 2027, with both N2 and A16 capacity expected to double again in 2028.
The N2 node is forecast to account for 29% of revenue in 2027, up from 15% in 2026, making it TSMC’s largest revenue contributor ever, Citi said.
"We thus expect N2 will become the biggest node and revenue contributor at TSMC ever, with accent demand and solid order visibility at least into next three years," Citi Research said.
Nvidia is expected to be the first A16 customer for its Feynman GPU in 2028, with Google and AWS AI chips migrating to N2 from late 2027, Citi said.
AI-related revenue at TSMC is expected to grow over 100% year-on-year into 2027. CoWoS packaging capacity is projected to grow from 1.3 million wafers in 2026 to 2 million in 2027, with COUPE co-packaged optics ramping in volume in 2028.
Citi said near-term energy supply concerns tied to Middle East tensions were manageable and were not incorporated into its production disruption assumptions.