Jeff Pu
Technology Equity Analyst at GF Securities
Tower Semiconductor's silicon photonics demand is accelerating earnings, supporting a Buy with a $260 target, or 26x 2027E EPS. 2Q26 revenue rose 24% to $460M and operating profit 125%, with an EPS beat on utilization and mix. 3Q26 guidance is a record $520M, up 31% YoY. Hyperscalers have locked in $1.3B of 2027 SiPho revenue, 2028 wafer commitments should exceed 2027, and new customers are qualifying. 2026/27 EPS estimates rise to $4.5 and $10, with NPO volume ramping in 2H27. x.com
Tower Semiconductor is a key AI infrastructure enabler as silicon photonics momentum builds: it has secured $1.3B of SiPho revenue commitments for 2027, already received $290M in customer prepayments, and expects 2028 commitments to be even higher. Q1 2026 revenue rose 15% to $414M with operating profit up 96%, and Q2 guidance is a record $455M. It is expanding capacity for next-gen NPO/CPO optics, 2026/27 EPS estimates rise to $5.0 and $9.5, and the Buy rating is maintained. x.com
Tower Semiconductor's silicon photonics ramp is running ahead of schedule, per Wedbush, pulling it into a better revenue and margin mix from AI datacenter optics. Q1 revenue beat, gross margin hit 26.8%, and about $290 million of prepayments back $1.3 billion of contracted 2027 SiPh revenue, which management calls a floor. Wedbush sees CPO share shift as a risk from 2028 at the earliest. It raised its target to $300 from $140 but stays Neutral, seeing the good news as increasingly priced in. … Show more
Tower Semiconductor's earnings call carried strong commentary, and the stock's steady performance makes it a calmer holding than Nebius. Its year-to-date and one-year trend show a steep angle of ascent, suiting an investor who cannot watch the screen all day. Proceeds from exiting Nebius go to Tower, with another third to be added. x.com x.com
Tower Semiconductor's good news looks mostly priced in at a $27 billion market cap, with upside hinging on capacity timing. A reported BofA Buy call with a $367 target rests on Tower's silicon photonics lead, and the numbers have substance: SiPho's run rate rose from $180 million to $680 million in a year, backed by a $1.3 billion 2027 contract. But its Arai, Japan fab reaches full production only in Q4 2027, a delay would push back the 2028 model, and $367 assumes those targets are hit on time. … Show more
Tower Semiconductor looks set to be the leading silicon-photonics foundry as the path to CPO runs through NPO. First NPO deployments are planned for 2027, with $1.3B of contract value for 2027 alone and more after. A multi-year IQE epi-wafer deal protects it from the InP bottleneck, it is bringing laser-to-silicon bonding in-house, and a dual-track 300 mm plan in Japan aims to quadruple capacity without dilution. Its SiPho coherent modules for Marvell have passed multi-million units. x.com
Tower Semiconductor's roughly $3 billion silicon photonics and silicon germanium expansion in Japan confirms real demand on the scarce foundry floor of the optical buildout. Japan is backing about $1 billion in grants, and Tower raised its 2028 model to $3.6 billion of revenue and $1.2 billion of net profit, versus $1.6 billion and $245 million today. Few merchant fabs can make co-packaged optics chips at 300mm, and Morgan Stanley put Tower in that supply chain beside TSMC and GlobalFoundries. … Show more
Tower Semiconductor probably has little upside left, trading at 43x the $500M net profit it projects once its foundry buildout is complete and running at 85% utilization. By contrast, TSMC trades at 24x 2026 earnings. x.com
Tower Semiconductor is a silicon photonics foundry behind the AI optical stack, and the market will price it for where its revenue mix is going. Its silicon photonics revenue doubled in 2025 on hyperscaler demand, more than 70% of capacity is booked through 2028, and it is partnered with Nvidia on next-gen optical modules. As @joedab12 noted, it is not a pure play yet: silicon photonics is still a minority of revenue, but the fastest-growing piece. x.com x.com
Tower Semiconductor's stronger-than-expected capacity expansion lets it fill more optical-chip orders itself, reducing customers' incentive to move to foundries they regard as technologically weaker. Its hybrid bonding packs dense connections between photonic chips and their driver electronics, an advantage viewed as effectively unmatched among Western suppliers. Tower remains one of the highest-conviction holdings despite the portfolio trim. x.com
Tower Semiconductor's CPO ramp is not fully priced at 47.7x forward earnings. It makes the silicon photonics chips inside AI datacenter optical transceivers, a process too specialized for most fabs, and hyperscalers building 1.6T switches need it. Its Q2 guide of $455 million beat the $436 million consensus, implying real order pull-through. If Q2 lands at $455 million or more, the stock has a path to $320-340 by year-end; the photonic foundry bottleneck will not fix itself in two quarters. … Show more
Tower Semiconductor's 2028 guidance makes its shares attractively valued around $180 despite competition from Silith, GlobalFoundries, STMicroelectronics and others. The stock previously felt too rich to add to. x.com x.com
