Morgan Stanley Highlights Key Risks to TSMC from Potential Intel Joint Venture
Investment bank Morgan Stanley has released a detailed analysis outlining the most significant risks to TSMC should the company pursue a potential joint venture with Intel. Amid ongoing market speculation about collaboration encouraged by the Trump administration, Morgan Stanley emphasizes that the lack of clarity surrounding the potential partnership is currently affecting TSMC's stock valuation.
According to Morgan Stanley’s latest analyst note, the bank maintains an Outperform rating for TSMC’s shares, with a price target of NT$1,388. TSMC’s stock closed at NT$952 on Taiwan’s stock exchange today, significantly below the target price. Morgan Stanley attributes this gap to three primary concerns: the rumored joint venture with Intel, volatility in AI product demand, and potential U.S. tariffs targeting Taiwanese exports.
Joint Venture with Intel: A Major Firm-Specific Risk
Among these factors, Morgan Stanley considers the potential Intel partnership to be the most significant threat to TSMC's long-term growth, as it represents a specific, company-related uncertainty rather than industry-wide volatility. According to the bank's analysts, a joint venture with Intel could undermine TSMC's ability to control critical technical and operational decisions. Given the intricate complexities of semiconductor manufacturing, losing control over these key areas could threaten TSMC’s technological lead.
Moreover, even if the joint venture achieves financial success and helps Intel rebound to profitability, it may inadvertently narrow the technology gap that TSMC currently enjoys over Intel, thereby weakening TSMC’s competitive advantage.
AI Demand and Tariff Risks: Manageable Concerns
Morgan Stanley assesses the other risks as less severe compared to the joint venture scenario. On the topic of AI-related demand, the analysts noted that TSMC had effectively resolved earlier concerns regarding packaging constraints within its AI chip production chain. While potential declines in AI demand remain a factor, Morgan Stanley sees this as less damaging, given that such demand volatility would broadly impact the semiconductor sector rather than TSMC alone.
Regarding potential U.S. tariffs against Taiwanese exports, Morgan Stanley argues that even if tariffs were implemented, TSMC's customers would largely bear these additional costs, mitigating the direct impact on TSMC’s financial performance. Nonetheless, the uncertainty around tariffs should be resolved soon, as President Trump’s administration plans to announce measures by April 2nd.
Management Clarity Essential for Stock Recovery
Morgan Stanley concludes that clear communication from TSMC management explicitly ruling out a joint venture with Intel could significantly alleviate investor concerns. Such a clarification could potentially drive TSMC’s share price closer to the investment bank’s stated NT$1,388 target, contingent on continued strong demand for AI-driven semiconductor products.
While Morgan Stanley focuses on the implications of a possible joint venture, Intel’s new CEO, Lip-Bu Tan, is already prioritizing the revitalization of Intel's foundry business. Tan has repeatedly expressed his commitment to aligning Intel’s capabilities closely with customer requirements, aiming to establish a competitive global foundry business.
Do you believe TSMC would benefit from collaboration with Intel, or should they prioritize maintaining their independent technology leadership? Share your thoughts in the comments below!
