TSMC's Rising Capex Trends and Bernstein's Outperform Rating: A Closer Look

Bernstein SocGen Group analyst Mark Li reiterated an Outperform rating on Taiwan Semiconductor Manufacturing Company Limited (TSM) with a $249.00 price target. TSMC's significant position in the semiconductor equipment market and rising capex trends are driving Bernstein's analysis. The firm noted that TSMC's spending is deflationary, while China's is inflationary, and the US is pushing companies to bring production back home. The WFE-to-semiconductor ratio remains elevated due to onshoring trends and technological complexity.

Bernstein analyst Mark Li has reiterated an Outperform rating on Taiwan Semiconductor Manufacturing Company Limited (TSM) with a $249.00 price target. This decision is driven by TSMC's significant position in the semiconductor equipment market and rising capital expenditure (capex) trends. The firm noted that TSMC's spending is deflationary, while China's is inflationary, and the U.S. is pushing companies to bring production back home. The wafer fab equipment (WFE) to semiconductor ratio remains elevated due to onshoring trends and technological complexity.

TSMC's strategic importance in the global semiconductor landscape is highlighted by its market share, accounting for approximately 15-25% of the worldwide WFE market, compared to China's 30-40%. Bernstein's analysis indicates that a substantial portion of TSMC's capital expenditure goes toward infrastructure and non-wafer-based equipment, such as packaging and testing technologies, rather than solely wafer fabrication equipment. This focus on advanced chip production is a key factor in TSMC's strong performance.

In its latest report, TSMC delivered impressive Q2 2025 results, with revenue climbing to NT$933.79 billion (US $30.07 billion), up 38.6% year-over-year; while net income reached NT$398.27 billion (about US $13.53 billion), and diluted EPS came in at NT$15.36 (US $2.47 per ADR), a 60.7% jump year-over-year. These figures underscore TSMC's robust financial performance and growth potential.

Bernstein's analysis also points to contrasting market dynamics, describing TSMC as "deflationary" while characterizing China's semiconductor investment as "inflationary and much bigger." This analysis highlights the unique positioning of TSMC in the global semiconductor market and its potential for continued growth.

While TSMC remains a strong investment opportunity, Bernstein acknowledges that certain AI stocks may offer greater upside potential and carry less downside risk. Investors should consider these factors when evaluating their portfolio.

References:
[1] https://finance.yahoo.com/news/bernstein-reiterates-outperform-tsmc-tsm-045408447.html
[2] https://za.investing.com/news/analyst-ratings/bernstein-reiterates-outperform-rating-on-tsmc-stock-at-249-price-target-93CH-3843097
[3] https://www.theglobeandmail.com/investing/markets/stocks/TSM/pressreleases/34206380/tsmc-tsm-new-buy-recommendation-for-this-technology-giant/