Investing.com -- Bernstein said in a note Monday that it sees a potential 20% upside in Taiwan Semiconductor shares, saying the chipmaker’s growth outlook remains intact despite the conflict in the Middle East.

Analyst Mark Li wrote that “AI continues gathering momentum, and non-AI demand also remains strong,” as he raised the price target on TSMC to NT$2,200.

Li explained that AI-driven revenue is broadening beyond XPU chips, noting that “XPU demand still exceeds TSMC’s capacity,” while TPU demand1 is “getting stronger lately.”

He added that SK hynix, Micron Technology and NVIDIA are now asking TSMC to produce HBM base dies, which they expect will help AI revenue rise from 18 percent of total revenue last year to the “low- to mid-20s percent” range in 2026.

To meet rising demand, Li expects TSMC to “build slightly more CoWoS capacity,” with outsourced assembly firms expanding as well.

Any weakness in non-AI demand will be “offset by AI,” he said, adding that TSMC’s exposure to high-end smartphones keeps overall demand resilient.

Meanwhile, Bernstein sees no disruption from the Middle East conflict, saying that “energy price may rise, but electricity is only low single-digit percent of TSMC’s revenue,” and the company “can easily hike prices” to pass on costs.

Concerns about helium or materials shortages are also unfounded, with TSMC confirming “no disruption from the conflict.”

Bernstein models earnings to rise 40 percent this year and a 20 percent CAGR into 2027 and 2028.

Li said geopolitical volatility may create opportunities, recommending investors “build more position on short-term pullbacks.”