AI redefines strong growth trajectory! Wall Street significantly raises Taiwan Semiconductor's target price: 2026 revenue is expected to grow by 30%

Wallstreetcn
2026.01.08 06:51
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JP Morgan and Nomura Securities believe that TSMC's core growth logic is shifting from the past cyclical drive to a sustained high-growth trajectory defined by deep binding of AI demand, long-term capacity shortages, and technological monopolies. It is expected that revenue in USD will grow by approximately 30% by 2026, while tight capacity and strong pricing power will support its gross margin to remain stable above 60% in the long term

Top investment banks on Wall Street are conveying a simple and brutal fact to the market: The super cycle of AI hardware has just begun, and Taiwan Semiconductor Manufacturing Company (TSMC) is the unshakable "toll booth" in this feast.

According to Wind Trading Platform, JP Morgan and Nomura Securities both significantly raised their target prices for TSMC in their latest research reports released on January 7. JP Morgan raised its target price to NT$2,100, while Nomura set an even higher target of NT$2,135.

The logic behind this is simple and brutal: extreme capacity shortages and insatiable demand. The demand from AI data centers is forcing TSMC into a new structural growth phase. JP Morgan bluntly stated that TSMC's dollar revenue will surge by 30% in 2026 and continue to maintain a growth rate of over 20% in 2027. Nomura pointed out that due to severe supply shortages, TSMC has strong pricing power and directly raised its target price to NT$2,135.

What does this mean for investors? JP Morgan and Nomura Securities believe:

  1. Valuation Reassessment: The target price has been significantly raised to above NT$2,100, suggesting that the current stock price still has substantial upside potential.

  2. Surge in Capital Expenditure: To meet demand, TSMC's capital expenditure will approach US$50 billion in 2026 and may soar to over US$55 billion in 2027, which will drive the entire semiconductor equipment supply chain.

  3. Deeper Moat: In the 2nm and advanced packaging (CoWoS) fields, TSMC has virtually no competitors, and this monopoly position will translate into sustained high margins.

30% Revenue Growth Locked in for 2026, AI as the Absolute Main Engine

JP Morgan predicts that 2026 will be another strong growth year for TSMC, with dollar revenue expected to grow by 30% year-on-year, and 2027 will also maintain a growth rate of over 20%. The core driving force behind this growth is undoubtedly the demand for AI in data centers.

  • Surge in AI Revenue Proportion: JP Morgan raised its compound annual growth rate (CAGR) forecast for data center AI revenue from 53% to 57% for the period of 2024-2029. It is expected that by 2029, AI business in data centers will account for over 40% of TSMC's total revenue (compared to just a median of a few percent in 2024). Nomura also emphasized the rapid increase in the proportion of AI business. Although its report did not provide a specific forecast for the proportion by 2029, it clearly stated that the "severe supply constraints" of AI semiconductors are key drivers for the upward revision of consensus earnings expectations, listing AI chips and server supply chains as "anchors" in the Asian market.

  • Full Migration to N3: By 2026, almost all AI accelerators (including NVIDIA Rubin, Broadcom TPU v7/v8, Amazon Trainium 3, etc.) will migrate to the 3nm process (N3). Additionally, the demand for Apple's iPhone and baseband chips will also drive the utilization rate of N3 capacity

Dominance of Advanced Process Technology Solidified: N2 Ramp-Up Speed Astonishing, N3 Demand Explodes

Despite the noise in the market regarding competition between Intel and Samsung in advanced processes, JP Morgan has clearly pointed out that there are no signs of TSMC losing market share at the N2/A16 node. TSMC's market share in the AI accelerator market during the N2 era is expected to remain above 95%.

  • N2 (2nm) Explosion: The ramp-up speed of N2 capacity will significantly outpace that of N3 and N5. JP Morgan expects N2 revenue to reach $8 billion by 2026, soaring to $36 billion by 2027. Nomura also noted that N2 has begun mass production at TSMC's Hsinchu and Kaohsiung facilities, with initial customers including Apple (iPhone 18 series) and AMD.

  • N3 (3nm) Capacity Expansion: To meet demand, TSMC is aggressively expanding N3 capacity. JP Morgan expects N3 capacity to reach 147,000 wafers per month by the end of 2026. This includes converting some N4 capacity to N3 and utilizing Fab 14 for cross-factory operations.

Data Center AI Annual Compound Growth Rate Revised to 57%, Advanced Packaging Capacity Continues to be Tight

In addition to advanced process wafers, advanced packaging is also a key growth area.

  • CoWoS Capacity Surge: JP Morgan expects TSMC's CoWoS capacity to increase by 69% by 2026, reaching 115,000 wafers per month in the fourth quarter of 2026 (compared to 68,000 wafers at the end of 2025). Even so, the supply-demand gap remains at 15-20%, indicating that capacity tightness will persist until 2027.

  • Non-Wafer Revenue Growth: Driven by strong CoWoS expansion and rising adoption rates of SoIC (System Integrated Chip) in 2027, non-wafer revenue is expected to grow by 44% and 29% in 2026 and 2027, respectively.

Capital Expenditure Initiates Upward Cycle, Gross Margin Stabilizes Above 60%

To address strong demand from 2026 to 2028, TSMC is initiating a new round of capital expenditure (Capex) upward cycle.

  • Capital Expenditure:

    • JP Morgan Forecast: Capital expenditure in 2026 is expected to be around $48 billion (limited by cleanroom availability), jumping to $55 billion in 2027 to support the expansion of N2, N3, and U.S. factories.

    • Nomura Forecast: Capital expenditure in 2026 is expected to remain between $45 billion and $50 billion, accelerating to $55 billion to $60 billion in 2027.

  • Gross Margin (GM):

    • JP Morgan Viewpoint: Gross margin is expected to stabilize in the low 60% range. In the first half of 2026, due to a large number of urgent orders bringing a 50-100% premium, gross margin may spike to 62-63%

  • Nomura's Viewpoint: It is expected that the gross profit margin will reach 61.5% in 2026-2027. Nomura specifically mentioned that TSMC may raise the base price of N5/N3 by 5-10% in January 2026 to alleviate cost pressures, which will also become an important support for the gross profit margin.

Target Price Aiming Above 2100 New Taiwan Dollars, Valuation Still Attractive

Both investment banks have significantly raised TSMC's target price, maintaining ratings of "Overweight" or "Buy."

  • JP Morgan: Raised the target price for December 2026 from 1700 New Taiwan Dollars to 2100 New Taiwan Dollars. This valuation is based on a 20 times price-to-earnings ratio of the estimated EPS for 2027. JP Morgan believes that TSMC's recent strong performance will continue in the coming months.

  • Nomura: Raised the target price from 1855 New Taiwan Dollars to 2135 New Taiwan Dollars, based on a 25 times price-to-earnings ratio of the estimated EPS for 2026. Nomura pointed out that TSMC's current trading price is only 20 times the expected EPS for 2026, which represents an unreasonable discount of about 27% compared to the 27 times price-to-earnings ratio of the Philadelphia Semiconductor Index (SOX), making the valuation extremely attractive

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