The Zhitong Finance App learned that as the US chip giant Texas Instruments (TXN.US), which focuses on analog chips, will announce its results this week, chip stocks in the US stock market, one of the core driving forces of this round of “long-term US stock bull market” since 2023, are about to enter a new earnings season. According to Wall Street financial giant Goldman Sachs's semiconductor analyst team, the latest performance and outlook of Taiwanese chip manufacturing giant TSMC reveals that demand for AI chips is still growing at a blowout, while semiconductor manufacturing and testing equipment are also in a strong growth cycle due to the recovery in chip demand. Therefore, Goldman Sachs believes that US chip giants will soon release strong financial data and future performance prospects one after another.
Trump officially returned to the White House on January 20, and traders began to anticipate that the “Trump 2.0 era” might drive a comeback in inflation, causing investors to worry that the NASDAQ Composite Index and the S&P 500 Index, which are currently near historical highs, may enter a downward trajectory. Therefore, the strong performance growth data of the chip giants that occupy the high weight of the NASDAQ and S&P 500 is critical to boosting the “AI faith” of global technology investors and the overall bullish trend of US stocks.
Wall Street financial giant Goldman Sachs pointed out in a recently released research report that the fourth quarter results and 2025 performance outlook announced by TSMC, the “king of chip foundry” headquartered in Taiwan, were far superior to expectations. The positive performance outlook indicates an optimistic growth trend among AI chips and global semiconductor wafer manufacturing equipment (WFE), test equipment, and semiconductor raw materials suppliers.
Overall, Goldman Sachs's semiconductor industry analysis team believes that TSMC's performance growth continues to accelerate, and that management's confidence in the long-term growth trajectory of the chip foundry business has completely recovered, and supports the agency's positive and constructive views on key drivers in the field of high-performance computing, network infrastructure, and enterprise-grade storage dominated by AI chips. Goldman Sachs reiterated its positive outlook on US chip giants in the research report, including Nvidia (NVDA.US), which has a high weight in the NASDA/S&P 500 index — Goldman Sachs reiterated its “buy” rating and It continues to be included in Goldman Sachs's “Convinced Buy” stock ratings and reaffirmed “buy” stock ratings for Broadcom (AVGO.US), Maywell (MRVL.US), Arm (ARM.US), Credo Technology (CRDO.US), and Micron (MU.US).
Earlier, an analyst team from Bank of America (Bank of America), another major bank on Wall Street, recently stated in a report that chip stocks are likely to be one of the best-performing sectors in the US stock market in 2025, and that the contribution to the increase is expected to expand from chip companies such as the “Big Three AI chips” that have fully benefited from the AI boom to analog chips and electric vehicle chip stocks that have long outperformed the US stock market and the “non-AI” chip stocks of the Philadelphia Semiconductor Index.
The “Big Three AI Chip Companies” in the US chip sector — that is, Nvidia, Broadcom, and Mywell Technology all rank on the Bank of America's 2025 “Preferred Chip Stock List”. Bank of America's chip stocks also include semiconductor equipment giant Fanlin Group (LRCX.US), automotive chip leader Ansemi Semiconductor (ON.US), and Keng Teng Electronics (CDNS.US), one of the leaders in EDA software.
Overall, the Bank of America analysis team expects the overall sales volume of the semiconductor market to grow by about 15% to reach $725 billion in 2025, building on the strong growth in 2024. “This is still a very strong growth pace, although it is still a very strong growth rate, although it is down from the 20% forecast for this year.” “The semiconductor market demand boom cycle often lasts about 2.5 years (followed by a 1-year decline cycle), and we are currently only in the middle of this semiconductor upward cycle that began in the fourth quarter of 2023.”
According to the latest forecast from World Semiconductor Trade Statistics (WSTS), global automotive chips and analog chips, where demand has been sluggish since 2022, will usher in the long-awaited “recovery moment” for the market in 2025. WSTS's latest fall forecast data for 2024 and 2025 was drastically raised compared to the spring forecast. The global semiconductor market is expected to grow 19.0% year-on-year to US$627 billion in 2024. W STS expects the global semiconductor market to continue to grow from 2024, which means that the global semiconductor market is expected to grow by about 11.2% on top of the already strong recovery trend in 2024, and the global market size is expected to reach about $697 billion.
WSTS predicts that the semiconductor market growth in 2025 will be mainly driven by the enterprise-class memory chip category driven by strong AI training/inference computing power requirements, and the artificial intelligence logic chip category. It is estimated that in 2025, the overall market size of the logic chip category, which includes CPU, GPU, and ASIC chips, is expected to increase by about 17% year on year, and the memory chip category market size covering HBM, enterprise SSD and NAND fields is expected to grow more than 81% year on year in 2023 13%; WSTS also expects the growth rate of all other chip segments, such as discrete devices, optoelectronics, sensors, MCUs, and analog chips, to reach single-digit growth rates.
Goldman Sachs comments on TSMC's performance: AI chip-driven growth is extremely strong, and the future can be expected
TSMC, headquartered in Taiwan, announced its results for the fourth quarter of 2024 last Thursday. Both these results and management's outlook for the future exceeded Wall Street analysts' consensus expectations. Goldman Sachs said that by application area, TSMC's high-performance computing (HPC) business, which covers AI chips and server CPU foundry, once again stood out strongly. The year-on-year revenue growth rate of TSMC's HPC business further accelerated from 57% in the second quarter of 2024 and 65% in the third quarter to a 69% increase.
Looking ahead, TSMC's management expects: a) overall revenue growth of about 25% for the full year of 2025, with artificial intelligence (AI) related revenue expected to double; b) capital expenditure is expected to be about 38 billion to 42 billion US dollars (34% year-on-year increase by median), which is in line with Goldman Sachs's expectations, but higher than Wall Street's general expectations; c) shared the CAGR target for the next 5 years (that is, 2024-29) of which AI-related revenue is expected to increase by about 45%.
Goldman Sachs's semiconductor analysis team believes that TSMC's latest performance, outlook, and management comments are a very optimistic sign of positive growth for companies (such as Nvidia, Broadcom, and Mywell Technology) and semiconductor manufacturing equipment, test equipment, and materials suppliers (i.e. Applied Materials, Fanlin Group, and Kelei, etc.) covered by Goldman Sachs.
In the research report, the Goldman Sachs analysis team combined TSMC's performance outlook to indicate the overall situation of the semiconductor industry: after a year of 6% year-on-year increase in chip foundry 2.0 revenue (that is, lower than TSMC's previous expectations, due to an unfavorable macroeconomic environment), the company expects the chip manufacturing industry's revenue to increase 10% year-on-year in 2025. This forecast is based on the view that the waferless semiconductor industry (the so-called fabless) will end at a normal inventory level in 2024. The latest revenue growth acceleration predicted by TSMC management and Goldman Sachs's highest level of industry expectations based on trend line analysis There is a consensus on growth.
Goldman Sachs is bullish on chip leaders in high-performance computing (HPC) and semiconductor manufacturing equipment (WFE)
Demand for AI chips is currently extremely strong, and this will probably be the case for a long time to come. According to information, according to data recently released by the Semiconductor Industry Association (SIA), driven by strong demand for AI chips, the global semiconductor market sales reached about 57.8 billion US dollars in November 2024, an increase of 20.7% year-on-year over the 47.9 billion US dollars in November 2023, and 1.6% month-on-month compared to the 56.9 billion US dollars set in October 2024.
John Neuver, President and CEO of SIA, said in a statement: “The global semiconductor market continued to grow substantially in November, reaching the highest total monthly sales in history. Monthly sales increased for eight consecutive months. Year-over-year sales increased by more than 20% for four consecutive months, with sales in the Americas growing 54.9% year-on-year.”
AMD CEO Su Zifeng recently said at a new product launch that demand for data center AI chips, including AI GPUs, has far exceeded expectations, and it is expected that by 2027, the data center AI chip market will reach 400 billion US dollars and further rise to 500 billion US dollars in 2028, which means that the compound annual growth rate of the global data center AI chip market is expected to exceed 60% from the end of 2023 to 2028.
TSMC's high performance computing (HPC) revenue achieved a 19% month-on-month benchmark, and its year-on-year growth rate accelerated from 57%/65% in the previous two quarters to 69% in the fourth quarter of 2024. Although Goldman Sachs said that recent supply-side uncertainty has been caused by Nvidia's latest Blackwell-based AI server system's heating and chip connectivity issues, Goldman Sachs believes that TSMC's latest comments on the demand for artificial intelligence (Al) chips (note that TSMC's AI chips include commercial AI GPUs, AI ASICs, and HBM storage systems for artificial intelligence training and inference) bode well for companies that are promoting infrastructure construction in the field of artificial intelligence. Specifically, TSMC management indicated that it is expected that AI related revenue will double in 2025 (it has tripled in 2024), and will grow at a 5-year CAGR rate of about 45% by 2029.
Goldman Sachs said that TSMC's forecast for future capital expenditure that exceeds expectations is beneficial to semiconductor manufacturing equipment, test equipment, and semiconductor material providers. TSMC expects the 2025 capital expenditure range to be around US$38 billion to US$42 billion (up 34% year-on-year in median terms), which is basically in line with Goldman Sachs's expectations, but higher than the general expectations of investment institutions.
As chip manufacturers such as TSMC, Samsung Electronics, and Intel continue to expand AI chip production capacity based on advanced manufacturing processes of 7nm and below, and TSMC's large-scale chip manufacturing plants in the US, Japan, and Germany will accelerate the production capacity construction process starting in 2025, TSMC is expected to purchase the most advanced lithographs, advanced packaging equipment, etching equipment, and high-end semiconductor equipment such as film deposition and chip monitoring and measurement equipment in large quantities in recent years, as well as some core raw materials. These semiconductor equipment suppliers mainly include top equipment vendors in the chip industry chain such as Asmack, Applied Materials, Kelei, Tokyo Electronics, Shin-Etsu Chemical, and BE Semiconductor.
Goldman Sachs pointed out in the research report that TSMC plans to use about 70% of its capital expenditure for advanced chip manufacturing processes (generally defined as 7nm and below), 10-20% for special chip nodes, and 10-20% for advanced packaging, testing, mask manufacturing, and other projects. Note that the allocation to advanced chip manufacturing processes declined slightly (from 70-80% to about 70%), while the allocation for advanced packaging, testing, mask manufacturing, and other items increased slightly (from about 10% to 10-20%) compared to the capital expenditure provided by management during its Q3 2024 results conference call.
Given TSMC's steady capital expenditure guidelines, the Goldman Sachs analysis team expects investors' expectations for the overall cutting-edge chip foundry, GPU, and ASIC logic chip industry to improve, as this is related to semiconductor manufacturing equipment (WFE) spending in 2025, even if Intel and Samsung (LSI/chip foundry) may occur or have a potential year-on-year decline. Overall, Goldman Sachs believes that TSMC's optimistic outlook on its chip foundry business, combined with higher-than-expected 2025 capital expenditure guidelines, bodes well for key WFE suppliers, including Applied Materials, Fanlin Group, and Kelei.
Applied materials can be described as being everywhere at TSMC's chip factory. Unlike Asmack, which has always focused on the field of lithography, the high-end equipment provided by Applied Materials, headquartered in the United States plays an important role in almost every step of chip manufacturing. Its products cover important core manufacturing processes such as atomic layer deposition (ALD), chemical vapor deposition (PVD), rapid heat treatment (RTP), chemical mechanical polishing (CMP), wafer etching, and ion implantation. Applied materials have high-precision manufacturing equipment and customized solutions in the two major chiplet advanced packaging processes of wafer hybrid bonding and through silicon via (Through Silicon Via), which are essential for 2.5D and 3D advanced packaging steps.
Another global semiconductor equipment market leader, Ke Lei, focuses on chip yield monitoring systems. Its breakthroughs in broadband plasma optical inspection technology and the latest detailed chip defect inspection system have provided semiconductor manufacturers with more powerful tools to improve production efficiency and product quality. Its advanced technology and equipment occupy an important position in the industry and are widely used in various semiconductor manufacturing processes.
Goldman Sachs also believes that TSMC's revenue growth forecast for 2025 (that is, an increase of about 25% year over year), and management comments indicating a slight recovery in utilization in 2025 have a positive impact on Entegris (Goldman Sachs gave a “buy” rating). About 75% of the semiconductor materials sector's revenue comes from consumables sales affected by semiconductor industry wafer startup (note that TSMC accounts for about 11% of Entegris's overall revenue in 2023).
Entegris is an important supplier in the semiconductor industry. It mainly focuses on providing a series of key technology and raw material products such as high-purity materials, chemicals, and chip factory gas treatment and filtration systems. These products help chip manufacturers such as TSMC manufacture chips in a high-precision, ultra-clean production environment, thereby improving production efficiency and reducing defect rates. Entegris's high-purity chemicals and chip manufacturing raw materials occupy an important position in the global chip industry chain, especially in the production of advanced chip processes (such as 7nm and 5nm processes) and next-generation chips (2nm and below).
Goldman Sachs is particularly concerned about TSMC's constructive comments on N2 (or 2nm) chip manufacturing capacity (that is, TSMC expects the number of N2 films to exceed N3 and N5 in the next two years, mainly driven by smartphone and HPC applications). Considering the potential for growth in each wafer capacity, Goldman Sachs said that this is certainly a very positive performance outlook for Entegris. However, Goldman Sachs did acknowledge that the entire semiconductor industry's wafer startup environment is still full of challenges. Many NAND chip suppliers cut production in real time, and the manufacturing scale of back-end chip manufacturing nodes is still limited to a certain extent due to excessive chip inventory in automotive and industrial fields.