Purchase Taiwan Semi Inventory Right into a Weak Chip Market, Says J.P. Morgan

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J.P. Morgan says buyers ought to overlook any near-term softness within the chip enterprise and purchase Taiwan Semiconductor Manufacturing Firm shares for the corporate’s sturdy future prospects.

On Tuesday, analyst Gokul Hariharan reiterated his Obese ranking for

TSMC

(ticker:

TSM

). The analyst additionally reaffirmed his $650 Taiwan greenback worth goal for TSMC’s Taiwan-traded shares. The forecast represents about 33% upside from present ranges in TSMC’s American depositary receipts.

“TSMC is now firmly positioned as the important thing enabler of the brand new computing revolution within the semiconductor trade, with a number of architectures, chip platforms and design groups competing to push computing and AI innovation,” he wrote. “Regardless of a 2023 downturn, we see robust long-term progress within the subsequent few years.”

Hariharan predicts TSMC could face further order cuts within the first half of subsequent yr due to deteriorating demand within the smartphone and pc end-markets. However the analyst stated buyers ought to give attention to the corporate’s sustainable management in bringing new superior chip-making capabilities to its clients.

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He’s additionally optimistic over TSMC’s plans to develop its chip-making capability outdoors of Asia. The analyst estimates the corporate will ultimately construct 10% to fifteen% of its superior chip making applied sciences within the U.S.

“We count on the corporate’s accelerated U.S. capability expansions to alleviate market considerations of potential share losses from a worsening geopolitical panorama,” he wrote.

Taiwan accounts for greater than 90% of the world’s most superior chip manufacturing, with South Korea at 8%, in keeping with a report final yr from the Semiconductor Trade Affiliation and the Boston Consulting Group. A lot of the capability comes from TSMC, which was established in 1987, and has pioneered the enterprise mannequin of creating chips for exterior clients.

Write to Tae Kim at [email protected]