Taiwan Semiconductor Manufacturing Co. (TSM, Financial) rose more than 4% Friday after Morgan Stanley upgraded the stock to its Top Pick, citing strong AI-related capital spending plans from Meta (META, Financial) and Microsoft (MSFT, Financial), according to a Friday note.
Morgan Stanley analysts, led by Charlie Chan, said earlier concerns about AI demand durability, a potential joint venture with Intel (INTC, Financial), and tariff risks had kept TSM from regaining the top spot. With those overhangs easing, the stock is now the firm's preferred pick in the sector.
Recent guidance from Meta lifted its 2025 capex outlook to $64 billion to $72 billion, up from a previous range of $60 billion to $65 billion. Microsoft also flagged ongoing AI demand, with a growing but moderating capex pace expected into fiscal 2026.
Supply chain checks indicate that demand for TSM's CoWoS-L (Chip-on-Wafer-on-Substrate-L) packaging remains stable, despite investor worries after Nvidia flagged possible order cuts.
On the Intel front, the analysts said TSM had ruled out a JV, noting Intel's plans to internalize production could keep its contribution flat or lower in 2026.
Morgan Stanley added that TSM's $165 billion U.S. investment could improve its odds of tariff exemptions.
