Morgan Stanley Turns Bullish on TSMC Ahead of Q2 Earnings
Summary
Morgan Stanley has turned bullish on TSMC, recommending a 'buy' ahead of its Q2 earnings on July 17. The bank cites strong preliminary Q2 revenue (NT$933 billion, up 16% QoQ USD), surging AI demand, and anticipated full-year revenue guidance raise (27% YoY growth for 2025). TSMC's $165 billion U.S. fab investment is seen as a geopolitical insulator. Morgan Stanley maintains a NT$1,288 price target, indicating 17% upside, positioning TSMC as a top semiconductor pick.
Morgan Stanley Turns Bullish on TSMC Ahead of Q2 Earnings
Publication Date: July 15, 2025
Morgan Stanley has issued a strong 'buy' recommendation for Taiwan Semiconductor Manufacturing Co. (TSMC) shares, anticipating robust performance ahead of its Q2 earnings release on July 17. The bank's optimistic outlook is primarily driven by surging demand for Artificial Intelligence (AI) chips and stronger-than-expected revenue growth.
TSMC's preliminary Q2 revenue reached NT$933 billion, marking a significant 16% quarter-on-quarter increase in USD terms. This figure comfortably surpassed both TSMC's internal guidance and broader Wall Street estimates, signaling strong operational momentum.
AI Demand Lifts Guidance Outlook
Morgan Stanley analysts project a high probability that TSMC will revise its full-year revenue guidance upwards, forecasting an impressive 27% year-over-year revenue growth for 2025. This revised outlook is largely attributed to the escalating demand for AI-related semiconductors.
Interestingly, the bank noted that previous order cuts in 3nm PC chips have been effectively offset by a surge in crypto mining demand. Furthermore, customers are reportedly accelerating orders in anticipation of a 2026 wafer price hike, contributing to sustained order volumes. Despite a sluggish environment in the broader PC and smartphone sectors, TSMC's utilization rates remain robust, reinforcing confidence in the sustained demand for its advanced semiconductor technologies.
Tariff Risk Offset by U.S. Expansion
TSMC's substantial $165 billion investment in U.S. fabrication facilities is viewed as a strategic move that could mitigate potential tariff risks. This significant expansion positions the company favorably amidst escalating global trade tensions, potentially securing exemptions or preferential treatment.
Morgan Stanley has maintained its price target for TSMC at NT$1,288, suggesting a considerable 17% upside from current trading levels. This target reflects the bank's confidence in TSMC's market position and future growth prospects.
Key Takeaway
TSMC remains a top pick for Morgan Stanley within the semiconductor sector. The company presents a unique combination of AI-driven revenue upside, strong valuation support, and strategic geopolitical insulation through its U.S. expansion. The upcoming Q2 earnings call is expected to serve as a critical bellwether for the broader chip industry, which has recently experienced margin pressures and valuation corrections. TSMC's performance will likely provide key insights into the health and trajectory of the global semiconductor market.