Mizuho initiated coverage of Tower Semiconductor with an ‘Outperform’ rating and a $300 price target.

  • Analyst Vijay Rakesh sees optical connectivity becoming increasingly important as AI data centers move from 800G toward 1.6T and 6.4T bandwidth.
  • He said Tower is positioned as a leading foundry for silicon photonics chips used in optical connectivity transceivers.
  • Mizuho estimates the silicon photonics market for optical connectivity transceivers could reach $8.5 billion by fiscal 2029.

Tower Semiconductor (TSEM) shares rose in early morning trade on Friday after a Mizuho initiated coverage of the stock with an ‘Outperform’ rating, citing growing demand for optical connectivity in AI data centers. 
TSEM stock rose as much as 3% in pre-market trade after a drop of around 5.7% in the previous session. On Stocktwits, retail sentiment around the company shifted to ‘bearish’ from ‘neutral’ territory over the past day, accompanied by chatter at ‘high’ levels. 

TSEM stock retail sentiment on September 25 as of 6:45 a.m. ET | Source: Stocktwits

Mizuho set a price target of $300, which implies a potential upside of nearly 40% from Thursday’s close. 

Tower Positioned For Silicon Photonics Growth

Mizuho analyst Vijay Rakesh said optical connectivity will become increasingly important as AI data centers move from 800G to 1.6T and eventually 6.4T bandwidth.

The higher speeds are needed to move growing volumes of data between GPUs, servers and networking equipment as AI workloads become more demanding.

Rakesh said Tower is the leading and fastest-growing foundry for silicon photonics chips used in optical connectivity transceivers. Mizuho estimates the market for those chips could reach $8.5 billion by fiscal 2029.

The analyst said Tower is also outpacing competitors on capacity expansion and market-share gains, giving the company an opportunity to capture a larger portion of the growing market.

How Is The Rest Of Wall Street Feeling?

The 12-month average price target on TSEM stock stands at $314.36, according to Koyfin data, which implies a potential upside of over 44%. Of the eight analysts covering the stock, seven give TSEM a ‘Buy’ or ‘Strong Buy’ rating with only one recommending ‘Hold’.

TSEM stock has gained over 88% year-to-date and more than 220% in the last 12 months.

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