TSMC(US:TSM) Hua Er Jie Jian Wen·2026-01-20 12:48Core Viewpoint - TSMC's Q4 financial results and guidance exceeded market expectations, but investor focus has shifted from performance to strategic concerns regarding aggressive expansion plans and capital expenditure increases [1][2]. Group 1: Capital Expenditure and Market Share - TSMC's capital expenditure guidance for 2026 is set at $52 billion to $56 billion, significantly higher than market expectations by approximately $6 billion to $11 billion, raising discussions about the aggressive investment strategy [2]. - Analysts from Morgan Stanley suggest that strong AI semiconductor growth and potential equipment supply constraints necessitate TSMC's aggressive capacity expansion to avoid market share loss in the next 2-3 years [2][9]. - TSMC is accelerating infrastructure development, including advanced packaging plants AP9 and AP10 in the U.S., with potential prepayments for equipment to smooth capital expenditures in 2026 and 2027 [2][9]. Group 2: Revenue Growth and Production Efficiency - TSMC's revenue guidance for 2026 indicates nearly 30% year-over-year growth, attributed to improved production efficiency [3][5]. - The long-term gross margin target has been raised from 53% to 56% or higher, reflecting confidence in AI opportunities and sustainable production efficiency improvements [5][9]. - Analysts expect TSMC to achieve a gross margin target exceeding 56% despite increased capital expenditures, with a revised gross margin assumption of 63% for 2026 [5]. Group 3: AI Demand as a Growth Catalyst - The primary catalysts for TSMC's future growth are centered around the AI market, with global cloud service providers' capital expenditure guidance directly impacting TSMC's order visibility [6][8]. - The total addressable market (TAM) for AI semiconductors is projected to grow to $550 billion by 2029, with AI semiconductors expected to account for 20-25% of TSMC's total revenue by 2026 [6][9]. - TSMC has raised its AI semiconductor revenue growth forecast from 45% to a compound annual growth rate (CAGR) of 55-59% for 2024-2029, aligning closely with Morgan Stanley's 60% prediction [6]. Group 4: U.S. Investment and Strategic Partnerships - Following a tariff agreement with the U.S. requiring $250 billion in direct investments, TSMC is expected to contribute significantly, with plans for substantial investments in U.S. facilities [1][9]. - TSMC's previous announcement of a $165 billion investment in the U.S. by 2030 includes plans for 30% of its 2nm and below capacity to be located in the U.S., indicating a strategic push to meet customer demand [9]. Group 5: Stock Valuation and Analyst Recommendations - TSMC remains a preferred stock for analysts, with a target price of NT$2,088, reflecting strong AI capital expenditure guidance and a favorable valuation compared to historical price-to-earnings ratios [10][13]. - The stock is currently valued at 15 times the projected earnings per share for 2027, close to the average forward P/E ratio of 16.5 times since 2018, indicating an attractive investment opportunity [10][13].