TSMC: Driving AI Growth and Long-Term Demand

TSMC’s recent earnings call provided substantial optimism for the long-term growth of its AI accelerator business. The company reported that revenue from AI accelerators is expected to double in 2025, growing from a “mid-teens percentage” of total revenue in 2024 to an estimated 20-25% in 2025. This exceeds its prior guidance of 18-20%.

TSMC also revealed an ambitious compounded annual growth rate (CAGR) of mid-40% for AI accelerator revenue over the next five years, significantly higher than market expectations. For 1Q25, the company projected revenue between US\$25.0-25.8 billion, which represents a 5.5% quarter-on-quarter decline. However, this guidance aligns with consensus estimates, albeit lower than more bullish forecasts.

In addition to revenue growth, TSMC raised its capital expenditure (capex) forecast to US\$38-42 billion for 2025, surpassing market estimates of US\$38-40 billion. Approximately 70% of this will be allocated to advanced process nodes, with 10-20% directed towards specialty technologies, advanced packaging, testing, and other processes. Furthermore, TSMC reiterated its commitment to expanding its CoWoS (Chip-on-Wafer-on-Substrate) capacity, addressing market concerns about potential order cuts.

Despite short-term challenges, including delays in NVIDIA’s GB200 NVL72 systems and a potential bottleneck in the supply chain, TSMC’s robust guidance on AI accelerators is expected to boost investor confidence in the near term.

Foxconn Industrial Internet (FII): Positioned for Long-Term Gains

FII (Ticker: 601138 CH) is one of the largest NVIDIA AI server original design manufacturers (ODMs). The company remains highly sensitive to news surrounding NVIDIA’s GB200 systems production ramp-up, which continues to face delays and uncertainties. Despite these near-term challenges, FII is well-positioned for future growth, particularly in the GB300 era, where higher customisation levels by cloud service providers (CSPs) could translate to increased opportunities.

FII’s full-stack solution offering for AI server racks—including liquid cooling, power supply, interconnection cables, assembly, design, and testing—sets it apart from other global ODMs. This comprehensive approach enhances its competitiveness in a highly customisable and value-added market landscape. Additionally, higher levels of customisation directly amplify FII’s revenue potential by expanding dollar content per unit.

Currently trading at an undemanding valuation of 11.8x 2025 forward price-to-earnings (PE), FII’s stock is nearing -1 standard deviation below its historical mean. With most risks already priced in, the current valuation offers an attractive entry point for investors. UOB Kay Hian maintains a BUY recommendation with a target price of RMB30.00, representing a 44.0% upside from the current share price of RMB20.84.

ASMPT: Advanced Packaging Opportunities on the Horizon

ASMPT (Ticker: 522 HK) has faced recent share price corrections due to concerns over potential CoWoS order cuts, slow recovery in its mainstream Surface Mount Tools (SMT) business, and delays in chip-on-wafer order wins with TSMC. However, TSMC’s raised capex guidance and increased weighting toward advanced packaging (10-20% of total capex) offer a positive outlook for ASMPT’s growth trajectory.

As AI demand continues to surge, the advanced packaging segment is expected to play a critical role in ASMPT’s revaluation. The upcoming results season is anticipated to provide a potential trading window for the stock, offering near-term opportunities for investors.

ASMPT is currently trading at 25.4x 2025 forward PE, aligning with its historical PE mean. UOB Kay Hian maintains a BUY recommendation with a target price of HK\$104.50, reflecting a 40.8% upside from the current share price of HK\$74.20.

Key Takeaways and Market Implications

TSMC’s strong guidance on AI demand and its commitment to advanced technologies are expected to bolster investment sentiment in the semiconductor sector. While near-term concerns like NVIDIA’s GB200 delays and geopolitical risks remain, the long-term growth prospects for TSMC, FII, and ASMPT appear robust.

For investors, these companies represent strategic plays in the rapidly evolving AI and semiconductor industries. TSMC’s leadership in advanced nodes and AI accelerators, FII’s comprehensive AI server solutions, and ASMPT’s advanced packaging capabilities position them as key beneficiaries of the ongoing AI revolution.