Goldman Sachs Raises TSMC Capex Forecast Sharply on AI Demand
TREE NEWS reports: Goldman Sachs has substantially raised its capital expenditure forecasts for Taiwan Semiconductor Manufacturing Co., projecting 2027 capex of $85 billion and 2028 capex of $98 billion, up from prior estimates of $78 billion and $82 billion. The bank also indicated that TSMC’s potential new fab in Texas is not expected to reach mass production until after 2032, implying a far longer expansion cycle than the market had anticipated. Goldman maintained its “Buy” rating on TSMC, lifting its 12-month Taiwan-listed price target to NT$3,300 from NT$3,100 — roughly 28% upside — and raising its ADR target to $660 from $620, about 40% upside.
What Drove the Revision
Analysts Evelyn Yu and James Schneider attributed the higher capex outlook to two factors: cost inflation among equipment suppliers and initial spending on the potential Texas fab. The 2026 capex estimate was left unchanged at $64 billion. Critically, the Texas facility will not materially contribute to capacity until after 2032, meaning near-term supply remains dependent on existing N3 and N2 lines. Goldman kept its N3 and N2 capacity forecasts unchanged at 200,000 and 140,000 wafers per month respectively by end-2027, rising to 220,000 and 200,000 by end-2028. Advanced packaging capacity is expected to expand even faster: CoWoS annual capacity is projected to grow from 675,000 wafers in 2025 to 2.73 million in 2027 and 3.48 million in 2028, sustaining annual growth above 100%.
Earnings Momentum and Margin Dynamics
Goldman expects third-quarter revenue to rise 15.3% quarter-on-quarter in US dollar terms, followed by an 11.0% increase in the fourth quarter. Gross margins are forecast at 67.5% and 67.3% for the two quarters, a slight dip from 67.7% in the second quarter due to N2 ramp dilution. Margins are seen recovering to 67.5% in 2027 and 67.8% in 2028 as yields improve and utilization stays elevated. Earnings estimates were raised by 1% for 2026, 7% for 2027 and 8% for 2028, with 2027 and 2028 EPS now at NT$150 and NT$195.67.
Market Implications
For equity markets, the report reinforces the view that the AI infrastructure cycle is not peaking. A longer capex runway supports semiconductor equipment makers, advanced packaging suppliers and cloud capex beneficiaries, while also underpinning demand for memory and networking chips. Bond investors should note the scale of investment implies sustained corporate credit issuance from the semiconductor supply chain, though TSMC’s own balance sheet remains robust. For commodities, rising equipment costs and fab construction point to continued demand for industrial metals, specialty gases and ultrapure materials. In currencies, the Taiwan dollar could see structural support from TSMC’s export earnings, while the US dollar benefits from onshoring capex flows into Texas. Crypto markets are indirectly affected: stronger AI demand keeps pressure on advanced chip supply, sustaining the narrative that AI-related tokens and decentralized compute networks are tied to real hardware constraints.
Key Takeaways for Investors
- Goldman’s upgrade signals confidence that AI demand extends well beyond 2027, with server CPUs, networking chips and Agentic AI workloads broadening the customer base beyond GPU accelerators.
- CoWoS packaging growth above 100% annually is a critical bottleneck relief for AI chip shipments — a positive read-through for Nvidia, AMD and Broadcom.
- N2 ramp margin dilution is temporary; the trajectory supports TSMC’s pricing power and long-term profitability.
- The Texas fab timeline pushes meaningful new capacity past 2032, meaning supply tightness in leading-edge nodes persists longer than expected — supportive for pricing across the foundry industry.
- Watch the October 15 analyst meeting for management’s AI demand outlook through 2030, US expansion details and competitive positioning against Intel, Samsung and emerging rivals.
