AI is set for another strong growth trajectory! Wall Street significantly raises TSMC's target price: revenue expected to grow 30% by 2026.

AI is set for another strong growth trajectory! Wall Street significantly raises TSMC's target price: revenue expected to grow 30% by 2026.

Wall Street’s top investment banks are telling the market a simple and blunt fact: The supercycle for AI hardware has only just begun, and TSMC is the unshakeable "toll station" of this feast.

According to Chasing Wind Trading Desk, both JPMorgan and Nomura Securities released new research reports on January 7, sharply raising TSMC’s target price. JPMorgan raised the target price to NT$2,100, while Nomura is even more bullish at NT$2,135.

The logic behind this is simple and straightforward: production capacity is extremely tight, and demand is bottomless. The rising demand from AI data centers is pushing TSMC into a new phase of structural growth. JPMorgan bluntly stated that TSMC’s dollar revenue will surge 30% in 2026 and maintain growth above 20% in 2027. Nomura points out that with severe supply constraints, TSMC has very strong pricing power and sets their target price at NT$2,135.

What does this mean for investors? JPMorgan and Nomura believe:

  1. Valuation re-rating: Target price raised well above NT$2,100, indicating there is still substantial upside for the current stock price.
  2. Capital expenditures surge: To meet demand, TSMC’s CapEx in 2026 will approach $50 billion, and could soar above $55 billion in 2027 — this will drive the whole semiconductor equipment supply chain.
  3. Deepening moat: In the fields of 2nm and advanced packaging (CoWoS), TSMC has almost no competitors. This monopoly will translate into sustained high gross margins.

Revenue locked in for 30% growth in 2026, AI becomes the absolute main engine

JPMorgan forecasts 2026 to be another strong growth year for TSMC, with dollar revenue expected to grow 30% year-over-year, and over 20% growth sustained into 2027. The unquestionable core growth driver is data center AI demand.

  • AI revenue proportion spikes: JPMorgan now projects 2024–2029 data center AI revenue CAGR rising from 53% to 57%. By 2029, data center AI business is expected to account for over 40% of TSMC’s total revenue (in 2024, this figure is only in the mid-teens). Nomura also emphasizes the rapid rise of AI business share. Their report doesn't give a specific 2029 forecast but points out the “severe supply constraints” for AI semiconductors are a key driver for upgrading consensus earnings forecasts and names the AI chip and server supply chain as an “anchor point” for Asian markets.
  • Full migration to N3: In 2026, almost all AI accelerators (including Nvidia Rubin, Broadcom TPU v7/v8, Amazon Trainium 3, etc.) will migrate to 3nm process (N3). Additionally, Apple iPhone and baseband chip demand will further boost N3 capacity utilization.

Dominance in advanced nodes solid: N2 ramp is stunning, N3 demand explodes

Despite market chatter about Intel and Samsung competing in advanced nodes, JPMorgan clearly points out that at the N2/A16 nodes, there are no signs of TSMC losing market share. TSMC’s share of the AI accelerator market in the N2 era is expected to remain above 95%.

  • N2 (2nm) surge: N2’s capacity ramp will be much faster than N3 and N5. JPMorgan forecasts N2 revenue to hit $8 billion in 2026 and skyrocket to $36 billion in 2027. Nomura also notes that N2 volume production has started at TSMC’s Hsinchu and Kaohsiung sites, with Apple (iPhone 18 series) and AMD among the first batch of customers.
  • N3 (3nm) expansion: To meet demand, TSMC is aggressively expanding N3 capacity. JPMorgan expects by the end of 2026, N3 capacity will reach 147,000 wafers per month. This includes converting some N4 capacity to N3, as well as cross-fab operations via Fab 14.

Data center AI CAGR raised to 57%, advanced packaging capacity remains tight

Aside from advanced node wafers, advanced packaging is also a key growth driver.

  • CoWoS capacity surges: JPMorgan expects TSMC’s CoWoS capacity to grow 69% in 2026, reaching 115,000 wafers/month by Q4 2026 (up from 68,000/month at end-2025). Even so, supply shortfall will be 15–20%, so tight capacity will persist into 2027.
  • Non-wafer revenue growth: Driven by strong CoWoS expansion and rising SoIC (System on Integrated Chips) adoption in 2027, non-wafer revenue in 2026 and 2027 is expected to grow 44% and 29% respectively.

Capex starts an upward cycle, gross margin maintains above 60%

To respond to robust demand from 2026 through 2028, TSMC is starting a new upward cycle of capital expenditures (Capex).

  • Capital expenditure:
    • JPMorgan: 2026 Capex around $48 billion (limited by cleanroom availability), jumping to $55 billion in 2027 to support N2, N3, and US fab expansions.
    • Nomura: 2026 Capex is maintained at $45–50 billion, accelerating to $55–60 billion in 2027.
  • Gross Margin (GM):
    • JPMorgan view: Gross margin is expected to stabilize at the low 60% range. In H1 2026, due to urgent orders at 50–100% premium, GM could peak at 62–63%.
    • Nomura view: GM expected to reach 61.5% in 2026–2027. Nomura specifically notes that TSMC may increase baseline N5/N3 prices by 5–10% in January 2026 to ease cost pressure, further supporting gross margins.

Target price points to NT$2,100+, valuation remains attractive

Both banks have sharply raised their TSMC target prices with ratings maintained at “overweight” or “buy”.

  • JPMorgan: Raised the December 2026 target price from NT$1,700 to NT$2,100. The valuation is based on 20x P/E of projected 2027 EPS. JPMorgan believes TSMC’s strong performance will continue for the coming months.
  • Nomura: Raised target price from NT$1,855 to NT$2,135, based on 25x projected 2026 EPS. Nomura points out that TSMC’s current trading price is only 20x 2026 expected EPS, compared to the Philadelphia Semiconductor Index’s (SOX) 27x P/E, reflecting about a 27% unjustified discount, making the valuation extremely attractive.

 

~~~~~~~~~~~~~~~~~~~~~~~~

The above brilliant content is from Chasing Wind Trading Desk.

For more detailed interpretations, including real-time breakdowns and frontline research, please join [Chasing Wind Trading Desk · Annual Membership]

Risk Warning and DisclaimerThe market has risks, and investment requires caution. This article does not constitute personal investment advice, nor does it consider the individual investment objectives, financial situation, or needs of any particular user. Users should consider whether any opinions, views, or conclusions in this article fit their particular circumstances. Investments made based on this are at one’s own risk.