Summary
UBS on Monday lifted its target share price for Taiwan Semiconductor Manufacturing Co. (TSMC) to T$3,400 from T$3,000 and left its Buy recommendation in place, pointing to robust demand from the artificial intelligence sector as a primary driver of stronger growth. The brokerage also revised up its 2026 sales growth forecast and described momentum as likely to continue over coming years, noting TSMC could possibly raise prices by early-2027.
UBS view and financial expectations
In its note, UBS said it expects TSMC to escalate capital expenditures through 2026 to 2028. That planned increase in investment is intended to expand manufacturing capacity and address customer concerns about constrained supply. The firm framed a higher capex commitment as central to relieving client worries about supply limitations and the impetus for customers to seek second-source alternatives.
UBS further argued that a strengthened growth outlook across central processing units, accelerators, and prospective edge AI applications would likely underpin additional capacity expansion by TSMC.
TSMC's market position and demand dynamics
TSMC is described by the brokerage as the world's largest contract chipmaker by capacity and as the producer of the most advanced chips available, positions that have been advantageous for the company over the past three years. The company is a key supplier of high-performance processors used by the AI industry and has experienced outsized demand in recent years, prompting active efforts to increase capacity to offset a potential supply shortfall.
Near-term catalyst: Q2 earnings call
UBS expects TSMC to provide more detailed information about its capex plans during the company's second-quarter earnings call. The brokerage also anticipates TSMC will address concerns over competitive pressure from rivals such as Samsung Foundry, Intel, and Terafab.
TSMC is scheduled to report second-quarter results on July 16. According to Investing.com forecasts cited by the brokerage note, consensus estimates for the quarter place earnings per share at about $3.80 on revenue of $40.06 billion.
Implications
UBS's actions - raising the price target and upgrading the sales outlook - reflect an expectation that AI-driven demand will sustain TSMC's growth and justify elevated capital spending to expand capacity. The bank's view also implies the possibility of price adjustments by TSMC in the medium term, with a potential timing of early-2027 noted in the note.
What to watch next
- Details on the scale and timing of TSMC's capex program through 2026-2028, which UBS expects to be elaborated on the Q2 call.
- How management frames competition from Samsung Foundry, Intel, and Terafab and any plans to mitigate customer concerns about supplier concentration.
- Any commentary on potential pricing actions and their expected timing.