Goldman Sachs has released a report indicating that Taiwan Semiconductor Manufacturing Company (TSM, Financial) has raised its long-term revenue compound annual growth rate (CAGR) target to nearly 20% for the period from 2024 to 2029. This is an increase from the previous guidance of 15% to 20% for 2021 to 2026. Artificial intelligence (AI) is expected to be the primary growth driver for incremental revenue.
However, Goldman Sachs expressed slight disappointment with TSM's guidance on maintaining a long-term gross margin of 53% or higher. This year, TSM's capital expenditure is projected at approximately $40 billion, aligning with expectations. The company remains positive about AI, anticipating a doubling of AI-related revenue this year and projecting a mid-40% CAGR for AI revenue over the next five years starting 2024.
Addressing geopolitical risks, including potential transport restrictions with China, TSM is confident in managing these challenges. Despite geopolitical uncertainties, Goldman Sachs takes a conservative approach to TSM's growth outlook, adjusting its revenue growth forecast from 26.8% to 25% for this year. CoWoS capacity forecasts for this year and next remain at 635,000 and 1,020,000 units, respectively, with shipment estimates revised down by 6% and 2%.
Goldman Sachs has also adjusted TSM's earnings per share estimate for this year down by 1.2%, while raising next year’s estimate by 3.3%. The firm reaffirms its "buy" rating on TSM, keeping it on the "Conviction Buy" list and raising the target price from $254 to $259.
