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Here's How Taiwan Semiconductor Is Capitalizing on AI Boom
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Key Takeaways
TSM expects AI and HPC chips to drive its biggest growth in 2026 as HPC hit 61% of Q1 revenues.
TSM plans nine new wafer fab and packaging phases in 2026 to meet surging AI demand.
Taiwan Semiconductor sees CoWoS packaging capacity growing at more than 80% CAGR from 2022 to 2027.
Taiwan Semiconductor Manufacturing Company (TSM - Free Report) , popularly known as TSMC, expects its biggest growth driver in 2026 to be explosive demand for AI and high-performance computing (HPC) chips. Reflecting this trend, HPC accounts for 61% of first-quarter revenues. TSMC also raised its full-year 2026 revenue growth outlook to above 30% in U.S. dollar terms and increased its capital expenditure guidance toward the higher end of the $52-$56 billion range to support surging AI demand.
According to a news covered by Reuters, TSMC projects the global semiconductor market to surpass $1.5 trillion by 2030, compared with its earlier estimate of $1 trillion. AI and high-performance computing (HPC) are expected to account for 55% of the market, while smartphones and automotive applications are expected to contribute 20% and 10%, respectively.
To meet rising demand, TSMC is accelerating capacity expansion across 2025 and 2026, with plans to add nine new phases of wafer fabs and advanced packaging facilities in 2026 alone. The company expects capacity for its advanced 2nm and next-generation A16 chips to witness a CAGR of 70% between 2026 and 2028.
In advanced packaging, TSMC expects capacity for its Chip on Wafer on Substrate (“CoWoS”) technology — extensively used in AI chips developed by NVIDIA — to witness a CAGR of more than 80% between 2022 and 2027. The company also projects that demand for AI accelerator wafers will rise elevenfold from 2022 to 2026, underscoring the potential of the AI-driven semiconductor expansion.
Peer Update
Micron Technology (MU - Free Report) is capitalizing on the AI boom with its HBM solutions, which are increasingly being adopted by major hyperscalers and enterprise customers. On the second-quarter fiscal 2026 earnings call, the company highlighted strong customer interest in its HBM portfolio, which is expected to drive substantial revenue growth in the quarters ahead. Micron’s HBM portfolio is generating multi-billion-dollar quarterly revenues. Micron is poised to be the key beneficiary of surging AI-related infrastructure spending, as companies continue to build out GPU clusters and AI data centers that require advanced memory solutions.
GlobalFoundries (GFS - Free Report) is benefiting from rising AI infrastructure demand through its silicon photonics and high-performance SiGe solutions used in AI data center networking and optical interconnects. Strong adoption has caused its Vermont SiGe facility to become oversubscribed through 2027.
The company is also partnering with major AI and cloud players to advance the Optical Compute Interconnect (OCI) standard for AI scale-up networks and co-packaged optics. GLOBALFOUNDRIES launched its SCALE platform, a next-generation optical networking solution designed to support future AI networking requirements across multiple generations of technology.
TSM Stock Price Performance
Shares of TSMC have gained 115.1% over the past year compared with the industry’s growth of 105.9%. The S&P 500 composite has grown 30.8% in the same period.
Image Source: Zacks Investment Research
TSMC’s Valuation
From a valuation standpoint, TSM trades at a forward 12-month price-to-sales ratio (P/S) of 12.19X, above the industry median of 10.56X.
Image Source: Zacks Investment Research
TSM Stock Consensus Estimate Trend
The Zacks Consensus Estimate for TSM’s 2026 earnings has moved north 4.8% over the past 30 days.
View the Zacks #1 Rank List
Image: Bigstock
Here's How Taiwan Semiconductor Is Capitalizing on AI Boom
Key Takeaways
Taiwan Semiconductor Manufacturing Company (TSM - Free Report) , popularly known as TSMC, expects its biggest growth driver in 2026 to be explosive demand for AI and high-performance computing (HPC) chips. Reflecting this trend, HPC accounts for 61% of first-quarter revenues. TSMC also raised its full-year 2026 revenue growth outlook to above 30% in U.S. dollar terms and increased its capital expenditure guidance toward the higher end of the $52-$56 billion range to support surging AI demand.
According to a news covered by Reuters, TSMC projects the global semiconductor market to surpass $1.5 trillion by 2030, compared with its earlier estimate of $1 trillion. AI and high-performance computing (HPC) are expected to account for 55% of the market, while smartphones and automotive applications are expected to contribute 20% and 10%, respectively.
To meet rising demand, TSMC is accelerating capacity expansion across 2025 and 2026, with plans to add nine new phases of wafer fabs and advanced packaging facilities in 2026 alone. The company expects capacity for its advanced 2nm and next-generation A16 chips to witness a CAGR of 70% between 2026 and 2028.
In advanced packaging, TSMC expects capacity for its Chip on Wafer on Substrate (“CoWoS”) technology — extensively used in AI chips developed by NVIDIA — to witness a CAGR of more than 80% between 2022 and 2027. The company also projects that demand for AI accelerator wafers will rise elevenfold from 2022 to 2026, underscoring the potential of the AI-driven semiconductor expansion.
Peer Update
Micron Technology (MU - Free Report) is capitalizing on the AI boom with its HBM solutions, which are increasingly being adopted by major hyperscalers and enterprise customers. On the second-quarter fiscal 2026 earnings call, the company highlighted strong customer interest in its HBM portfolio, which is expected to drive substantial revenue growth in the quarters ahead. Micron’s HBM portfolio is generating multi-billion-dollar quarterly revenues. Micron is poised to be the key beneficiary of surging AI-related infrastructure spending, as companies continue to build out GPU clusters and AI data centers that require advanced memory solutions.
GlobalFoundries (GFS - Free Report) is benefiting from rising AI infrastructure demand through its silicon photonics and high-performance SiGe solutions used in AI data center networking and optical interconnects. Strong adoption has caused its Vermont SiGe facility to become oversubscribed through 2027.
The company is also partnering with major AI and cloud players to advance the Optical Compute Interconnect (OCI) standard for AI scale-up networks and co-packaged optics. GLOBALFOUNDRIES launched its SCALE platform, a next-generation optical networking solution designed to support future AI networking requirements across multiple generations of technology.
TSM Stock Price Performance
Shares of TSMC have gained 115.1% over the past year compared with the industry’s growth of 105.9%. The S&P 500 composite has grown 30.8% in the same period.
Image Source: Zacks Investment Research
TSMC’s Valuation
From a valuation standpoint, TSM trades at a forward 12-month price-to-sales ratio (P/S) of 12.19X, above the industry median of 10.56X.
Image Source: Zacks Investment Research
TSM Stock Consensus Estimate Trend
The Zacks Consensus Estimate for TSM’s 2026 earnings has moved north 4.8% over the past 30 days.
Image Source: Zacks Investment Research
TSM stock currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.