Goldman Sachs has increased its target price for Semiconductor Manufacturing International Corporation (SMIC) from HKD 134 to HKD 135, citing stable demand for AI-related products as a significant driver for the company’s growth trajectory. This adjustment reflects the firm’s optimistic outlook on SMIC’s capacity utilization and product mix improvements expected to bolster gross margins in the coming years.
In a recent research report, Goldman Sachs outlined five key factors anticipated to fuel SMIC’s growth in 2026. Chief among these is the rising demand for analog and logic chips, driven by trends in artificial intelligence. As overseas manufacturers shift towards high-end AI chips, SMIC is well-positioned to capture sustained growth in its mainstream product lines. The firm also noted that ongoing capacity expansion will enable additional revenue streams, while increasing demand from domestic clients will enhance supply security considerations.
Goldman Sachs remains optimistic about SMIC's prospects, maintaining a 'Buy' rating based on improved revenue forecasts. The firm has raised its earnings predictions for SMIC by 1% annually for the period between 2026 and 2029, attributing this to the company's ability to enhance its pricing power amid strong AI product demand. Despite a slight reduction in the estimated gross margin for 2026 by 0.6 percentage points, the long-term outlook for gross margins from 2027 to 2029 remains stable, with a steady upward trend expected.
The report emphasizes that SMIC’s strategy of improving its product mix, focusing on high-margin offerings, will be crucial as the semiconductor market evolves. Goldman Sachs expects that the combination of higher average selling prices and better product differentiation will help mitigate ongoing depreciation and amortization pressures.
Forecasted operating expense ratios for 2026 through 2029 have been adjusted down by 0.1 to 0.8 percentage points, indicating more efficient management of expenditures alongside anticipated revenue growth. This careful expenditure strategy, combined with revenue scale expansion, positions SMIC favorably in the competitive semiconductor market.
As SMIC prepares to meet the growing demands of the AI sector, its ability to handle these changes while maintaining operational efficiency will be key to its success. The increasing reliance on AI technologies across various industries suggests that SMIC stands to gain significantly, making its journey over the next several years one to monitor closely. Goldman Sachs’ updated forecasts highlight the importance of the AI token economy and GPU networks as foundational elements driving SMIC's strategic direction and overall market performance.
