Needham & Company analysts are confident about TSMC's  future revenue growth, raising its target price from $210 to $225. TSMC's revenue is expected to reach $110 billion in 2025, far higher than the market's previous expectation of $96 billion.

Analysts pointed out that as TSMC's financial reports exceeded expectations for several consecutive quarters, the market consensus has gradually converged to this forecast, showing investors' strong confidence in TSMC's future growth potential.

2024 Forecast and 2025 Momentum

Analysts expect TSMC's revenue to reach approximately $90 billion in 2024 and increase significantly by 23% to $110 billion in 2025. Needham analysis pointed out that the core driver of this growth is the increase in wafer shipments, rather than the increase in average selling prices.

With the continued improvement of TSMC's 5nm technology production capacity and the gradual expansion of 3nm production capacity, TSMC will further consolidate its dominant position in the high-end process market in the next two years. Needham predicts that TSMC's wafer shipments will increase by 13% in 2025, while the average selling price will increase by 10%.

Gross profit margin rebounds and advanced processes emerge

Needham predicts that TSMC's gross profit margin is expected to rebound to 60% in the second half of 2025. This forecast is based on the postponement of 2nm technology production, avoiding the dilution of profits that may be caused by premature mass production.

Analysts believe that TSMC has successfully responded to the market's increased demand for high-end chips through its leading 3nm and 5nm process technologies. These technological improvements have not only driven sales of AI processors, but also stimulated demand for smartphone-related chips, thereby significantly improving the company's financial performance.

AI demand becomes the key of Q3

TSMC's net income in the third quarter increased significantly, exceeding market analysts' expectations. The company's report pointed out that strong demand for AI-related businesses has become the main driver of revenue growth, and it has also boosted the market's optimism about the supply of AI chips.

Driven by TSMC's positive news, the share prices of other chip companies such as Nvidia (NVDA), Broadcom (AVGO) and Arm Holdings (ARM) also rose.

Industry Challenges and Market Recovery

Despite TSMC's outstanding performance, the semiconductor industry as a whole still faces challenges. The problem of excess inventory caused by weak consumer demand in some market areas has not been fully resolved, and this situation has lasted for more than a year.

Christophe Fouquet, CEO of ASML Holding (ASML), said that although AI has brought significant opportunities to the industry, the recovery pace of other market sectors is still slow.

The conservative outlook released by ASML triggered a decline in the semiconductor sector at the beginning of this week, and the Philadelphia Semiconductor Index (SOX) fell by more than 5% at the beginning of the week. However, TSMC's strong performance once again boosted market confidence, driving the index to rebound on the 17th.