2025-07-02 15:49Investment Rating - The report maintains an "Overweight" (OW) rating for TSMC based on strong demand in the AI supply chain [2][3][4]. Core Insights - TSMC's CoWoS capacity is projected to grow over 30% year-over-year, reaching approximately 90-95k by 2026, which is positive for both Nvidia and AI ASIC supply chains [2][3][4]. - There is strong demand for AI applications in China, but hardware supply constraints are a significant bottleneck [3][4]. - The report highlights a bullish sentiment among investors regarding AI, with key concerns focused on potential demand issues and alternative investments beyond Nvidia [2][3]. Summary by Sections TSMC Capacity and Demand - TSMC's CoWoS total capacity is expected to be around 90-95k in 2026, indicating a 33% growth from 70k at the end of 2025 [2][3][8]. - The CoWoS-L capacity may expand to 68k, reflecting strong demand for Blackwell and Rubin chips [2][3][8]. AI Supply Chain Insights - Chinese AI developers are aware of Nvidia's B30 chips, with foundry wafer orders totaling 2 million units in the second half of 2025, but no confirmed purchase orders have been made [3][4]. - If B30 shipments to China are not realized, developers may shift to Huawei chips, although availability remains uncertain [3][4]. ASIC Design Services - Alchip is expected to be the sole source for Trainium3 XPU, with revenue anticipated to ramp up significantly in 2026 [4][5]. - Marvell's focus will be on "XPU-attach" chips, and the longevity of Trainium2 will impact its growth in 2026 [4][5]. AI Capex and Market Sentiment - The top four US hyperscalers are projected to generate $550 billion in operating cash flow in 2025, supporting ongoing investments in AI-related data centers [31][32]. - The report anticipates a 43% year-over-year growth in cloud capex for 2025, up from a previous forecast of 39% [41][42].