TSMC: Balanced Opportunities and Challenges Lead to Hold Rating Amid AI Growth and Margin Concerns

TSMC (TSM – Research Report), the Technology sector company, was revisited by a Wall Street analyst today. Analyst Krish Sankar from TD Cowen maintained a Hold rating on the stock and has a $175.00 price target.

Krish Sankar has given his Hold rating due to a combination of factors that present both opportunities and challenges for TSMC. The company’s outlook for June 2025 shows promising growth, particularly driven by AI demand, with a projected 13% quarter-over-quarter increase, which is better than anticipated. Additionally, TSMC’s reaffirmation of its calendar year 2025 revenue growth target in the mid-20% range and its commitment to not pursuing joint ventures or partnerships with other foundries are seen as positive indicators.
However, there are concerns that temper the overall outlook. The expected increase in overseas fabrication spending is projected to lead to a 3-4% annual gross margin dilution in the coming years, which is a modest negative. While TSMC’s earnings per share for March 2025 exceeded expectations, and AI demand remains strong, the potential for demand pull-in and the looming risk of tariffs impacting future demand add uncertainty. These mixed factors contribute to the Hold rating, as they suggest a balanced risk-reward scenario for investors.