TSMC Faces Revenue 'Uncertainty' In 2028-29 As AI Investments Need To Prove Their Returns, Morningstar Analyst Says

• Lee said the semiconductor supply chain is evolving as AI demand grows, with advanced chips potentially giving way to other components as the industry's biggest constraint.
• That shift could partly explain why TSMC's stock has been relatively stable despite high expectations for its AI-driven growth, according to Lee.
• He added that TSMC's ability to expand supply alongside demand will also be important as bottlenecks move across the broader AI infrastructure supply chain.

Taiwan Semiconductor Manufacturing Co. (TSM) could see revenue growth remain strong through 2027, but a Morningstar analyst sees greater uncertainty emerging in 2028 and 2029 as AI investments face pressure to demonstrate returns.

During an interview with CNBC, Morningstar analyst Phenix Lee highlighted geopolitical concerns as another area of concern for the world’s largest contract chipmaker.

“For 2027, we do expect a 30% revenue increase, mainly driven by AI and other de-bottlenecking efforts. We are assuming an increase in demand and an increase in supply that can serve the growing market. More of the uncertainty is really on the 2028 or 2029 time frame when AI investments definitely need to prove their returns,” Lee said.

Taiwan Semiconductor’s American Depositary Receipts were up more than 1% in Tuesday’s pre-market trade.

AI Supply Chain Bottlenecks Could Shift

Lee said the semiconductor supply chain is evolving as AI demand grows, with advanced chips potentially giving way to other components as the industry's biggest constraint.

“Advanced chips may not be the tightest of the tightest constraints and some other components may be in the spotlight for now,” the analyst said.

That shift could partly explain why TSMC's stock has been relatively stable despite high expectations for its AI-driven growth, according to Lee. TSMC's ability to expand supply alongside demand will also be important as bottlenecks move across the broader AI infrastructure supply chain.

Lee also highlighted TSMC's increasing overseas manufacturing footprint as evidence that supply-chain stability and geopolitical considerations are influencing the company's decisions.

TSMC Takes Minority Stake In Sony Image Sensor Joint Venture

Sony Semiconductor Solutions and TSMC on Tuesday announced a definitive agreement to establish a joint venture in Kumamoto, Japan, focused on developing and manufacturing advanced image sensors for smartphones.

Sony will be the controlling shareholder, with plans to contribute approximately 465 billion yen ($2.92 billion) to the venture through cash and asset transfers. TSMC will contribute about 282 billion yen ($1.77 billion) in cash, with the investments to be made in phases depending on market demand and other business conditions.

Lee said Sony's majority stake was the biggest surprise from the agreement, particularly given TSMC's traditional preference for maintaining control over its manufacturing operations.

“TSMC used to be a company that doesn't like joint ventures,” he said, pointing to the company's 70% stake in its German fab as another recent departure from that approach.

Lee suggested that geopolitical considerations and supply-chain stability may be changing TSMC's calculus around overseas manufacturing.

TSMC’s July Revenue, Q2 Earnings At A Glance

The world's biggest contract chipmaker on Monday reported revenue of NT$467.58 billion ($14.5 billion) in July, up 44.7% year over year. The July increase followed a strong second quarter, with revenue rising 36% year over year to NT$1.27 trillion ($40.2 billion). Net income jumped 77.4% to NT$706.56 billion, while diluted earnings per share rose 77.4% to NT$27.25.

“Our business in the second quarter was supported by strong demand for our leading-edge process technologies,” TSMC Senior Vice President and Chief Financial Officer Wendell Huang said.

The company expects that momentum to continue into the third quarter, particularly as its 2-nanometer technology ramps up.

What Retail Traders Think Of TSM Stock

Retail sentiment on Stocktwits around TSMC trended in the ‘bearish’ territory at the time of writing.

TSMC stock is up 40% year-to-date and 73% over the past 12 months. The iShares Semiconductor ETF (SOXX) is up 118% over the past 12 months, while the Global X Artificial Intelligence & Technology ETF (AIQ) is up 41%.

The VanEck Semiconductor ETF (SMH) is up 94% during this period, while the Direxion Daily Semiconductor Bull 3X (SOXL) is up 406%.

NT$1 = $0.031, 1 JPY = $0.0063

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