Morgan Stanley sees improved outlook for TSMC's U.S. investment under new policy
'According to CNBC, under the latest 'big beautiful bill' passed by the U.S. Senate on July 1, tax credits for those semiconductor firms building capacity in the U.S. could rise from 25% to 35%,' Morgan Stanley wrote.
The policy change is expected to benefit companies such as Intel (NASDAQ:INTC), Micron (NASDAQ:MU), and TSMC.
The analysts said the revised credit structure 'reaffirms the policy encouragement' for semiconductor manufacturing in the U.S. and 'should reduce TSMC's profit burden for its U.S. capacity expansion.'
They reiterated their Overweight rating on the stock, calling TSMC their Top Pick.
While near-term growth is moderating, the firm remains bullish on TSMC's outlook. Morgan Stanley forecast third-quarter revenue to grow just 3% quarter-over-quarter in U.S. dollar terms, as some demand was 'pulled in by customers in 2Q25.'
Gross margin is expected to drop 1.5 percentage points to 55.8% amid 'the TWD's recent strong appreciation against the USD.'
Despite this, the bank expects full-year revenue growth guidance to be raised 'from mid-20% to high-20% due to strong AI demand.' A wafer price hike in 2026 and potential exemption from semiconductor tariffs were also cited as key re-rating catalysts.
'TSMC's 2026 CoWoS capacity expansion should be an important catalyst for global AI supply chain,' Morgan Stanley added, highlighting the company's pivotal role in the next leg of high-performance chip production. TSMC is set to report second-quarter earnings on July 17.
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