This article does not constitute investment advice. The author does not hold any shares in the companies referenced.
The Risks Facing TSMC Amid Potential Intel Collaboration
Morgan Stanley has identified critical risks for Taiwan Semiconductor Manufacturing Company (TSMC) concerning a possible joint venture with Intel. Following the appointment of Intel’s new CEO, Lip-Bu Tan, earlier this month, there were speculations about the Trump administration’s interest in partnering with TSMC to boost chip manufacturing in the United States. However, TSMC recently announced an increase in its US investment from $100 billion to $160 billion during a highly publicized event with President Trump. Despite this, Morgan Stanley warns that TSMC’s shares may remain underperforming, lingering below the bank’s target price of NT$1, 388, unless the company dismisses the potential for a partnership with Intel outright.
Key Factors Impacting TSMC’s Stock Value
In a recent analyst commentary, Morgan Stanley maintained its “Outperform”rating for TSMC, setting a price objective of NT$1, 388 for the firm’s shares, which closed at NT$952 in Taiwan. The bank cites three primary factors influencing the stock’s performance: the suspected collaboration with Intel, the demand for artificial intelligence (AI) products, and the potential for tariffs affecting Taiwan under the Trump administration. Among these, the prospective collaboration with Intel looms as the most significant impediment to TSMC’s share price.
Morgan Stanley observes that TSMC has effectively resolved previous packaging limitations within its AI supply chain—a concern that had attracted significant analyst scrutiny. They project robust demand for AI products in the current year, arguing that while decreased AI demand represents a risk to TSMC’s valuation, it poses a broader threat to the semiconductor sector as a whole, rather than being confined to TSMC itself.
The Implications of Tariffs on TSMC
Regarding tariffs, Morgan Stanley believes that if duties are imposed on Taiwan’s semiconductor exports, TSMC’s customers would shoulder most of the financial burden. The uncertainty surrounding these tariffs is expected to be clarified by April 2, corresponding with the deadline for President Trump’s announcement of new measures.
Potential Outcomes of a TSMC-Intel Collaboration
Given the potential implications, Morgan Stanley posits that a joint venture with Intel constitutes the largest threat to TSMC’s stock value as it is a factor intrinsic to the company itself. If TSMC were to engage in this partnership, it might lose autonomy over operational and technical decisions regarding chip production. Such a loss of control could diminish TSMC’s competitive edge, as semiconductor fabrication involves distinct manufacturing strategies that vary greatly among companies.
Further, Morgan Stanley contends that even if a TSMC-Intel collaboration is fruitful and helps Intel recover financially, TSMC’s technological advantage over Intel could diminish. The bank suggests that a clear denial from TSMC regarding the joint venture could spur a rise in its stock price towards the NT$1, 388 target, contingent upon sustained strong demand for AI innovations.
Intel’s Focus Under New Leadership
While discussions about a possible joint venture continue, Intel’s CEO Lip-Bu Tan is concentrating on revitalizing the company’s foundry business. In various statements since his arrival, Tan has emphasized his commitment to addressing customer needs in the pursuit of establishing a premier foundry at Intel.
For continuous updates on this evolving situation, refer to the original source.
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