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Is TSEM a good stock to buy? We came across a bullish thesis on Tower Semiconductor Ltd. on r/ValueInvesting by daxter_101. In this article, we will summarize the bulls’ thesis on TSEM. Tower Semiconductor Ltd.'s share was trading at $224.49 as of April 20th. TSEM’s trailing and forward P/E were 115.72 and 78.74, respectively according to Yahoo Finance.

Tower Semiconductor Ltd., an independent semiconductor foundry, provides technology, development, and process platforms for integrated circuits in the United States and internationally. TSEM, positioned as the dominant player in AI photonics, operates the only production-grade silicon photonics (SiPho) PDK globally, making it a critical partner for major semiconductor companies such as Lumentum (LITE), Coherent (COHR), Applied Optoelectronics (AAOI), Broadcom, and Marvell.

These firms rely on TSEM to fabricate their photonics chips, as no other foundry possesses the capability. Despite TSEM’s smaller market cap of $18 billion compared to its customers—LITE at $50 billion—the company’s strategic importance and near-monopoly in the SiPho supply chain create a significant competitive moat.

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The investment case is further reinforced by a structurally tight float of just 112 million shares, with approximately 25% locked in foreign pensions, leaving a tradable float of only ~35 million shares. This limited liquidity has created a strong price floor, evidenced by minimal downside during recent sector-wide declines, where Tsem fell only 1.48% while the broader sector dropped 8–14%. The company is poised for rapid growth, driven by a 70% year-over-year increase in SiPho revenue, a partnership with NVIDIA, and a $920 million capital expenditure plan aimed at quintupling SiPho production capacity.

With virtually no analyst coverage and a highly constrained tradable supply, any meaningful buying pressure is likely to result in a sharp re-rating. The combination of technological leadership, essential customer relationships, robust growth, and structural float scarcity positions Tsem as a unique investment with multi-bagger potential, offering an exceptional risk/reward opportunity for investors as the market increasingly recognizes its critical role in AI photonics.

Previously, we covered a bullish thesis on SkyWater Technology, Inc. (SKYT) by TheUndefinedMystic in January 2025, highlighting its role as the only U.S.-owned pure-play silicon foundry and partnerships in quantum computing and silicon photonics. SKYT’s stock has appreciated approximately 189.10% since then. daxter_101 shares a similar view but focuses on Tower Semiconductor Ltd. (TSEM)’s AI photonics dominance, near-monopoly, and tight tradable float.

Tower Semiconductor Ltd. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 46 hedge fund portfolios held TSEM at the end of the fourth quarter which was 38 in the previous quarter. While we acknowledge the risk and potential of TSEM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TSEM and that has 10,000% upside potential, check out our report about this cheapest AI stock.

Disclosure: None.