Tower Semiconductor Ltd. (TSEM): A Bull Case Theory 

We came across a bullish thesis on Tower Semiconductor Ltd. on stocks subreddit by Confident-Cell-2549. In this article, we will summarize the bulls’ thesis on TSEM. Tower Semiconductor Ltd.’s share was trading at $138.93 as of January 28th. TSEM’s trailing and forward P/E were 76.66 and 51.28 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 is often mischaracterized as just another foundry, but this view misses its increasingly strategic role in the AI data center supply chain as physical limits emerge in data transmission. As AI workloads scale, copper interconnects are approaching their limits, and while co-packaged optics (CPO) remain a longer-term solution, industry leaders like Broadcom have reaffirmed that pluggable optics will dominate the next phase.

This shift directly benefits Tower, which supplies the specialty silicon—particularly silicon photonics and analog/power components—that enables pluggable optical modules at scale. Tower sits at a critical layer beneath hyperscalers, supplying over 50 silicon photonics customers, including 7 of the top 11 datacom transceiver makers that sell into cloud giants such as Amazon, Microsoft, Google, and Meta.

The company’s relevance is demonstrated by partnerships such as InnoLight, which uses Tower’s PH18 silicon photonics platform to build high-speed transceivers for hyperscalers. Beyond volume optics, Tower’s technological edge is reinforced by its work with Anello Photonics on ultra-low-loss silicon nitride waveguides, a capability that is difficult to replicate and essential for precision photonics applications. This process has received validation through U.S. Navy-backed programs and is extensible across other customers. Third-party recognition from Coherent and Northrop Grumman further supports Tower’s credibility as a trusted innovation partner.

Strategically, Tower’s global manufacturing footprint, including its majority-owned Japanese operation, enhances capacity reliability, while competitive actions—such as Intel’s attempted acquisition and GlobalFoundries’ increased investment in silicon photonics—underscore the value of Tower’s niche. As pluggable optics remain the near-term standard, Tower Semiconductor appears well positioned as a structurally advantaged, bullish enabler of the AI optics ecosystem rather than a commoditized foundry.

Previously, we covered a bullish thesis on SkyWater Technology, Inc. (SKYT) by TheUndefinedMystic in January 2025, which highlighted its role as a U.S.-owned foundry enabling quantum computing through silicon photonics partnerships. SKYT’s stock price has appreciated by approximately 191.00% since our coverage due to rising investor interest in quantum computing and government-backed initiatives. Confident-Cell-2549 shares a similar thesis but emphasizes Tower Semiconductor’s exposure to AI-driven silicon photonics demand in data center optics.

Tower Semiconductor Ltd. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 38 hedge fund portfolios held TSEM at the end of the third quarter which was 28 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.

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Disclosure: None.