Citi International: Raises target price for TSMC to a market-high of $560, reiterates "Buy" rating.

Bank of China International published a report stating that TSMC's sales in April reached 410.7 billion New Taiwan Dollars, representing 33% of the midpoint of the second quarter revenue guidance, making it likely that the performance in the second quarter will touch the upper limit of the guidance. Driven by the demand for agent-style AI/inference AI and customers preparing early for capacity ramp-up, it is believed that TSMC is likely to achieve the upper limit target of the guidance range. The report indicates that TSMC is becoming more proactive in future capital expenditures, with estimated capital expenditures of 70-80 billion US dollars in 2027-2028, mainly focusing on expanding production capacity at multiple stages and locations of the N2/A16 nodes. With this expansion driving force, coupled with substantial inter-generational price premiums, N2 revenue is expected to surpass N3 rapidly in the middle of 2027, setting the fastest capacity ramp-up record in TSMC's history. In order to reflect the continuously increasing demand for AI/inference AI, Bank of China International has raised its earnings forecast for TSMC in 2027 by 7% to 126.92 New Taiwan Dollars per share and raised its target price to the highest in the market at 3,050 New Taiwan Dollars/560 US dollars. The "buy" rating is reiterated, considering TSMC's proven execution capability and scale advantage. Any share price pullback caused by the progress of Intel's foundry business should be viewed as a buying opportunity.