Needham Upgrades TSM to Buy, Forecasts 45% AI Revenue Growth by 2028

Needham, a prominent investment bank, has released a research report upgrading its rating for Taiwan Semiconductor Manufacturing Company (TSM.US) to "buy" and raising its target price from $225 to $270. The report forecasts that by 2029, TSM's artificial intelligence (AI) business revenue could reach $900 billion. This projection is based on a demand model for AI chips, which suggests that significant increases in unit production are not necessary to achieve this target.

Charles Shi, an analyst at Needham, explained that the model is built on TSM's publicly announced AI revenue target of approximately $900 billion by 2029 and the expected sales of AI accelerators, which are projected to reach around 50 million units by 2030. Shi noted that the increasing number of computing chips within packages and the transition to custom HBM base chips will lead to a substantial increase in silicon content. This, in turn, is expected to drive rapid growth in AI revenue to approximately $900 billion within four years.

Shi also mentioned that while the growth in TSM's AI business revenue may slow down in 2026, it is expected to rebound in 2027. He attributed this potential slowdown to a decrease in the unit production of AI accelerators and stagnation in the silicon content growth of NVIDIA's Rubin chip architecture. However, Shi anticipates that TSM's AI business revenue will still grow by 20% year-over-year in the coming year. Looking ahead, with the increased silicon content in the Rubin Ultra and Feynman chip architectures, Shi expects TSM's AI business revenue to accelerate significantly, with a year-over-year growth rate approaching 40% in 2027 and reaching 45% in 2028.