Is it still cheap to triple in a year? Bank of America is bullish on Takota Semiconductor (TSEM.US): What AI really makes huge profits is “handling data” chips

The Zhitong Finance App learned that Bank of America Securities has begun tracking and coverage of Gaota Semiconductor (TSEM.US), a leader in semiconductor manufacturing and foundry headquartered in Israel, giving it a “buy” rating and setting a target price of 367 US dollars.

A few days before Bank of America released this bullish rating, Takata Semiconductor just announced the best-performing quarterly earnings report in the company's history. Although its stock price has tripled (tripled) in the past year, the new “buy” rating at this level has attracted widespread attention.

What makes this investment interesting is the source of growth anticipated by Bank of America: not chips running AI models, but chips that transfer data between these chips.

It is this difference that forms the core of the entire bullish logic, and also explains why Bank of America analysts believe that this hot stock still has a lot of room to rise.

Gaota semiconductor for card-bit AI data torrents

Takata Semiconductor is a special foundry company headquartered in Migdal Haemek (Migdal Haemek), Israel. The company produces chips based on designs from other companies, focusing on analog and mixed-signal components rather than the cutting-edge, cutting-edge processors that make most news headlines.

Bank of America analyst Oliver Huang set a target price of $367 using 20 times the 2028 corporate value multiple (EV/EBITDA) predicted by Takata Semiconductor. Bank of America's profit expectations for 2027 and 2028 are 13% and 28% higher than Wall Street's general consensus, respectively.

The bank's analysts believe that the market has yet to price the rapid growth of a certain business segment of Gaota Semiconductor.

Gaota Semiconductor has a leading market share in the field of silicon photonic chips. Such chips are used in transceivers that transmit data within AI data centers.

Bank of America anticipates that Takata Semiconductor's silicon photonics business revenue will double in 2026, and this growth trend will continue into 2027 and beyond.

Silicon photonic chips are critical to AI data centers

Silicon photonics technology is a method of transmitting data using light instead of electrical signals. Within the data center, this means faster connections between servers and lower power consumption.

AI systems need to transfer massive amounts of data between thousands of chips. In large-scale applications, copper connections seem inadequate, so fiber connections are gradually taking over this task.

This is the part that investors often overlook: processors are responsible for computing, but optical devices are responsible for transmitting data, and it is these optical devices that Gaota Semiconductor makes.

It is this position that makes Bank of America think that Takata Semiconductor can benefit from AI spending without directly competing with Nvidia and its rivals.

The demand is already reflected in the data:

In the second quarter of 2026, the revenue of the silicon photonics business increased by more than 270% year on year; its annualized operating rate has exceeded US$680 million.

Takata Semiconductor expects this operating rate to exceed $1 billion by the fourth quarter of 2026.

Takata Semiconductors' record quarterly results supported the target price. Bank of America's rating is based on a strong earnings report. Takata Semiconductor announced record second-quarter results on August 4.

Revenue reached US$460 million, up 24% year over year. Net profit rose to US$91 million, an increase of 95% over the same period in 2025.

The gross margin reached 30%, a record high for the company. Takata Semiconductor also raised its third-quarter revenue forecast guide to approximately $520 million, which will continue its growth momentum.

Management raised its 2028 target to $3.6 billion in revenue and $1.2 billion in net profit. CEO Russell Ellwanger said these numbers have been guaranteed by the fulfillment of customer orders.

These results provided Bank of America with a financial basis to support aggressive price targets for this stock, which had previously risen sharply.

Takata Semiconductor's expansion plans in Japan

Takata Semiconductor is investing heavily to expand production capacity, and Japan is at the center of the plan.

In July of this year, the company confirmed that it had announced a dual-track production expansion plan for its 300mm silicon photonics and packaging business.

The project cost around $3 billion. The Japanese government will fund about 1 billion US dollars of this in the form of subsidies, and Takata Semiconductor will bear the rest.