New York, July 14, 2026, 19:02 (EDT)
Tower Semiconductor closed up 11.24% at $255.49 on Tuesday after it said it will expand its capacity in Japan, backed by $1 billion in government support. Tower is now aiming for $1.2 billion in net profit in 2028, up from its previous goal of $750 million—a boost of 60%. While the shares jumped, that new target is still more than five times the stock’s move, making the shares look cheaper by this measure.
Chip stocks rebounded, but fell short of a full recovery. The PHLX Semiconductor Index rose 314.15 points, or 2.54%, to finish at 12,661.93 after U.S. inflation data came in lighter than expected and traders took on more risk. The gain recouped about half of Monday’s 619.38-point drop, leaving the index 2.35% below where it closed on Friday.
The sector’s earnings are at a test. The SOX has dropped over 11% from its June peak as of Monday, and short interest in the biggest chip stocks is at a three-year high. “We’ve never seen this kind of extreme earnings growth,” said Steve Sosnick, chief market analyst at Interactive Brokers Group NASDAQ:IBKR. Alexander Lis, chief investment officer at SD Ventures, said recent price targets are “a consequence of the incredible momentum in semis rather than a reliable indicator of future performance.” Reuters
The last two sessions show where investors dug in:
| Company or index | July 14 close | Tuesday | Since July 10 |
|---|---|---|---|
| Tower Semiconductor NASDAQ:TSEM | $255.49 | up 11.24% | up 14.70% |
| Micron Technology NASDAQ:MU | $983.12 | rose 4.92% | up 0.39% |
| Nvidia NASDAQ:NVDA | $211.80 | gained 4.06% | up 0.40% |
| Taiwan Semiconductor Manufacturing Co NYSE:TSM | $420.39 | dropped 0.28% | fell 3.16% |
| PHLX Semiconductor Index | 12,661.93 | rose 2.54% | down 2.35% |
Closing prices use data from July 10, July 13, and July 14.
Micron and Nvidia have returned to Friday’s closing levels, while TSMC is still trading below where it ended last week as investors wait for Thursday’s earnings report. Tower shares rose above their last pre-drop close. The market moves look selective, with bets on a certain earnings outcome.
Tower’s updated model points to margin gains that outpace the company’s reported revenue growth:
| Tower 2028 measure | Previous target | New target | Change |
|---|---|---|---|
| Revenue | $2.80 billion | $3.60 billion | +28.6% |
| Net profit | $750 million | $1.20 billion | +60.0% |
| Implied net margin | 26.8% | 33.3% | +6.5 percentage points |
| Equity value / target net profit | 34.2 times | 23.8 times | -30.5% |
The estimate is based on 111.76 million shares and the closing prices from July 13 and 14, assuming the number of shares stayed the same. This isn’t the usual consensus forward P/E. The numbers don’t factor in cash, debt, or any dilution effects.
Tower ended Tuesday with an equity value around $28.6 billion, which is $2.9 billion higher than where it stood Monday. That’s almost triple the Japanese grant and about 6.4 times what’s expected from the 2028 profit increase of $450 million. So investors clearly priced in the margin reset and less funding stress, not only the subsidy.
Tower Semiconductor will begin converting its Arai site to 300-millimetre silicon-photonics, with the full switch set for Q4 2027. The process uses light to transfer data between chips. Tower also has a plan to add a new plant alongside Fab 7 to grow optical link output for AI data centre customers.
Chief Executive Russell Ellwanger said the second track offers “the path for continued growth far beyond 2028.” But right now, valuation depends more on the first track—Tower tied its new 2028 model to it. The new fab is expected to show up in earnings starting in 2029. Reuters
Tower used a three-year forecast, not real booked earnings, for its math. The company flagged risks including weaker demand, late construction or equipment, grants with tough conditions, and low factory use hurting profits. The next step also depends on getting related deals done and closed.
TSMC is in focus for chip stocks. The company is set to post a Q2 profit up 59%, hitting a record T$632.6 billion. But traders may look past the headline, watching for comments on spending and capacity, as TSMC’s ADR dropped 3.16% since Friday. Concrete numbers on capacity and profit are what matter now, not broader bullish talk.
