Morgan Stanley raised its price target for Taiwan Semiconductor Manufacturing Company by 5% to NT$2,088, reiterating the stock as a top pick. The upgrade follows TSMC's blowout quarterly report, which showed stronger-than-expected gross margins and an upside surprise in capital spending plans.

The bank increased its earnings estimates for 2026 and 2027, citing improved visibility. Management highlighted that AI-driven demand is the dominant growth engine, lifting the company's long-term revenue outlook. TSMC's Q4 gross margin hit 62.3%, well above guidance, with Q1 2026 guided even higher.

Capital expenditure forecasts were also increased, with TSMC planning $52-$56 billion in spending to support fab expansion. Analysts see the stock, trading at around 15 times 2027 earnings, as extremely attractive relative to its history, expecting it to draw more fund flows.