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Investing.com -- Morgan Stanley moved Taiwan Semiconductor Manufacturing back to a top pick, citing strong AI-driven capital spending from major tech firms and the easing of several key concerns.
“With the robust AI capex guidance from Meta (NASDAQ:META) and Microsoft (NASDAQ:MSFT), we move TSMC back to our Top Pick,” Morgan Stanley analysts wrote in a note.
The brokerage previously held back on this call due to “three major overhangs – (1) AI demand sustainability, 2) Intel (NASDAQ:INTC) JV possibility, and 3) semiconductor tariffs.”
On AI demand, Morgan Stanley said recent investor worries about order cuts for TSMC’s advanced CoWoS packaging technology appear overblown.
“Our latest supply chain checks suggest that CoWoS-L demand at TSMC is unchanged,” the analysts wrote.
They highlighted that Meta “raised its full-year 2025 capex plan” by about $7 billion, while Microsoft “signaled a shift in the mix of that spend...towards shorter duration server kit to fill those data centers.”
The Intel overhang is also said to look less concerning, with TSMC expected to play a limited role in future CPU production.
“TSMC’s N2 should be used to produce both CPU and GPU tiles, but it will be shared with Intel 18A,” Morgan Stanley said. They added that “TSMC management ruled out the JV possibility.”
Regarding semiconductor tariffs, Morgan Stanley said uncertainty remains until the May 7 decision but did not cite any new risk developments.
The firm emphasized that “TSMC is the more attractive OW [overweight]” stock compared to peers, trading at a 2025 estimated P/E of 15.5x.
“We have expected a quick rebound in the stock once these overhangs are removed,” the analysts said.
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