UBS: TSMC's 'Surprise CapEx Hike' Reinforces Confidence In AI Supply Chain

TSMC, or Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, raised its 2026 spending and revenue outlook on Thursday morning, a move UBS analysts said "boosts confidence in the AI supply chain."

TSMC manufactures chips designed by companies such as Nvidia, Apple, AMD, Qualcomm and Broadcom. It is a major supplier of Nvidia chips used in AI data centers. The company now expects 2026 capital expenditures of $60 billion to $64 billion, up from its previous forecast of $52 billion to $56 billion, while projecting dollar-denominated revenue growth of slightly more than 40%.

Here are second quarter results (courtesy of Bloomberg):

• Net income NT$706.6 billion, estimate NT$623.73 billion
• Gross margin 67.7%, estimate 67.1%
• Operating profit NT$766.6 billion, estimate NT$742.75 billion
• Operating margin 60.3%, estimate 58.6%
• Sales NT$1.27 trillion, estimate NT$1.27 trillion

Third quarter forecast:

• Sees sales $44.6 billion to $45.8 billion, estimate $43.11 billion (Bloomberg Consensus)
• Sees gross margin 65% to 67%, estimate 65.9%
• Sees operating margin 56% to 58%, estimate 57.7%

"AI-related demand continues to be extremely robust," TSMC Chairman C.C. Wei told analysts on a post-earnings call. 

TSMC also plans to invest another $100 billion in Arizona, lifting that total commitment to $265 billion. The expansion will include additional 2-nanometer chip plants and advanced packaging facilities to meet multi-year demand across the Americas. 

Wei added, "This is to build several or more semiconductor logical wafer fab for two nanometer MP [mass production] technologies, as well as advanced packaging fabs to support the strong multi-year demand from our leading U.S. customers."

CFO Wendell Huang said, "Our conviction in the AI megatrend is very strong.The capex in the next three years will be even more, significantly higher than in the past three years."

UBS analyst Crystal Hsu told clients earlier that "TSMC's Surprise Capex Hike Boosts Confidence In AI Supply Chain."

Hsu continued:

Despite TSMC's relatively conservative gross margin outlook for Q2 and Q3, investors generally believe the company prioritizes customer relationships and may smooth margin trends through the second half of the year.

The increase in capex guidance to USD 60–64 bn came as a positive surprise, as TSMC rarely raises capex guidance in Q2 and the magnitude of the revision exceeded 10%. Investors expect a positive read-through for the semiconductor production equipment (SPE) space.

More importantly, TSMC's constructive commentary could help restore market confidence, as many investors see little change in the underlying fundamentals despite the market pullback over the past month, which appears to have been driven largely by positioning and sentiment rather than by a deterioration in fundamentals.

Shares of TSMC were marginally higher in Asia, closing up a little more than 1%. The stock has gained 59% this year as the AI boom propels chipmakers to new highs. But in recent weeks, the AI trade has hit a brick wall as Goldman warns of rising hyperscaler bond issuance and mounting stress in credit markets.

TSMC's accelerating expansion comes a day after ASML Holding delivered strong earnings and raised its full-year guidance. ASML produces lithography machines, the equipment that chipmakers such as TSMC use to manufacture advanced semiconductors.