Morgan Stanley is bullish on the AI semiconductor rally: TSMC offers strong certainty, while ACM Research and Silicon Motion have over 50% upside to their price targets.

In Morgan Stanley's latest report covering the Greater China semiconductor sector, it gives the AI semiconductor supply chain an "Attractive" industry rating. Among investable U.S. equity names, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) is viewed by Morgan Stanley as the beneficiary with the highest certainty, and together with ACM Research (ACMR.US) and Silicon Motion Technology Corporation Sponsored ADR (SIMO.US), it forms a core beneficiary portfolio for the expansion of AI computing power. Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US), with the strongest certainty As the "shovel seller" for AI computing power, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR has an almost monopoly over the two key links of global advanced process and advanced packaging. Morgan Stanley gives Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR an "Overweight" rating with a target price of NT$3,088, implying about 21% upside from the current NT$2,550, corresponding to about 22x 2026 expected P/E. The report expects that Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR may raise advanced-process wafer prices by 5% to 10% in 2027 against the backdrop of AI chip shortages, this reflects its irreplaceable pricing power. The demand side is equally solid: Morgan Stanley estimates that the share of its AI semiconductor revenue will exceed 30% in 2026, while 2nm (N2) capacity will expand at a compound annual growth rate of about 70%. With revenue growth diluting capital expenditure, a 60% gross margin is regarded as a "floor" rather than a "ceiling." In the field of CoWoS advanced packaging, Morgan Stanley expects global demand to increase from 689,000 wafers in 2025 to about 2.5 million wafers in 2027, and Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's CoWoS capacity may expand to 260,000 wafers per month by 2028. Morgan Stanley estimates that in 2025 Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR has already produced about 5.1 million AI chips, and full-year GB200 NVL72 rack shipments are expected to reach 30,000 units. Whether GPUs or in-house ASICs, they ultimately converge on Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's foundry and packaging capacity, making it the "greatest common denominator" of AI computing power expansion. ACM Research (ACMR.US): leader in cleaning equipment, target price $115 In the semiconductor equipment segment, Morgan Stanley gives ACM Research an "Overweight" rating with a target price of $115, implying significant upside of about 62% from the current $70.8, corresponding to about 25x 2026 expected P/E. As a domestic leader in cleaning equipment, ACM Research benefits from the dual logic of Chinese local wafer fab expansion and localization of advanced-process equipment, with 2026 EPS growth expected to reach 104%. Silicon Motion Technology Corporation Sponsored ADR (SIMO.US): leader in storage controller chips, target price $400 In the storage supply chain, Morgan Stanley gives Silicon Motion Technology Corporation Sponsored ADR (Silicon Motion) an "Overweight" rating with a target price of $400, implying about 53% upside from the current $261.9, corresponding to about 22.8x 2026 expected P/E. As the global leader in NAND storage controller chips, Silicon Motion Technology Corporation Sponsored ADR directly benefits from the NAND shortage and price increase cycle triggered by AI storage, with 2026 EPS growth expected to be as high as 263%. Himax Technologies, Inc. Sponsored ADR (HIMX.US): display driver chips, Neutral rating By contrast, Morgan Stanley maintains an "Equal-weight" rating on Himax Technologies, Inc. Sponsored ADR with a target price of $17.4, implying about 31% upside from the current $13.3. As a display driver chip maker, Himax Technologies, Inc. Sponsored ADR has relatively weaker AI attributes, and although 2026 EPS growth of 65% is considerable, its valuation elasticity is not as strong as the aforementioned core AI names. The "certainty" ranking for U.S. semiconductor stocks is clear Taken together with Morgan Stanley's rating system, the certainty ranking of U.S. AI semiconductor names is very clear: Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR ranks in the first tier with its dual monopoly position in "advanced process + CoWoS packaging"; ACM Research and Silicon Motion Technology Corporation Sponsored ADR are respectively positioned in the two high-prosperity links of equipment and storage, attracting growth-oriented capital with the highest target-price upside; Himax Technologies, Inc. Sponsored ADR, however, is rated Neutral because of its limited AI exposure. However, Morgan Stanley also flags hidden concerns: AI semiconductor growth is expected to slow in 2027, and the capex growth rate of major cloud vendors may fall to around 12% in 2028. But at the current juncture, no matter how technology routes evolve, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, as the "greatest common denominator" of AI computing power, remains the U.S. equity allocation direction with the highest certainty in Morgan Stanley's view.