BofA Securities Initiates Tower Semiconductor with Buy Rating and $367 Target
Analysts project significant growth driven by AI data center infrastructure and a surge in silicon photonics revenue.
BofA Securities has initiated coverage of Tower Semiconductor (NASDAQ: TSEM) with a Buy rating and a price target of $367.00. This bullish outlook signals confidence in the company's capacity to capitalize on the rapidly expanding AI infrastructure market.
The $367 price target is derived from a valuation of 20 times the fiscal year 2028 enterprise value to EBITDA. A central pillar of this valuation is the growth of specialized technologies; specifically, BofA Securities estimates that revenue from Tower's silicon photonics segment will double in 2026.
The Shift Toward AI Infrastructure
Tower Semiconductor operates as an independent semiconductor foundry based in Israel. While the company has traditionally provided a broad range of foundry services, it is now strategically positioning itself to meet the rigorous demands of artificial intelligence. The focus has shifted toward silicon photonics, a technology that enables the use of light rather than electricity to transmit data. This capability is critical for the high-speed data transmission required within modern AI data centers, where traditional electronic interconnects often become bottlenecks.
Market Implications
This initiation of coverage represents a significant shift in the market narrative for Tower. By assigning a high price target based on 2028 projections, BofA Securities is framing Tower not merely as a general-purpose foundry, but as a specialized play on the physical layer of AI infrastructure. As data centers scale to accommodate larger large language models and more complex neural networks, the demand for the high-bandwidth, low-latency connectivity provided by silicon photonics is expected to rise.
Future Outlook
Investors will likely monitor Tower's ability to hit the 2026 revenue doubling target for silicon photonics as a key indicator of this strategy's success. While the long-term trajectory appears positive in the eyes of BofA Securities, the company's growth remains tied to the continued capital expenditure of AI data center operators and the successful scaling of its specialized photonics production. The transition from general foundry services to AI-centric specialized components marks a pivotal evolution in Tower's business model, potentially decoupling its valuation from broader semiconductor cycles and tying it more closely to the AI build-out.