Core Insights - The report from Morgan Stanley highlights a shortage in TSMC's 3nm capacity due to increased demand from major AI companies like Nvidia, AMD, and Tesla, prompting TSMC to urgently expand its production capacity [1][2] - TSMC is expected to increase its 3nm capacity by an additional 20,000 wafers per month by the end of this year, raising the total monthly capacity to 110,000-120,000 wafers, with further expansions planned for 2026 [1][2] - The anticipated capital expenditure for TSMC is projected to rise from the original $43 billion to between $48 billion and $50 billion for the upcoming year due to these expansions [1][2] TSMC Capacity Expansion - TSMC's 3nm capacity is set to increase to 140,000-150,000 wafers per month by 2026, primarily from the second phase of the Arizona facility and the conversion of existing 4nm and 5nm lines in Taiwan [2] - There are challenges related to cleanroom space, as some facilities are being repurposed for 2nm processes, limiting the expansion of 3nm capacity to existing sites [2] Impact on Semiconductor Industry - The expansion of TSMC's 3nm capacity and increased capital expenditure is expected to positively impact semiconductor equipment manufacturers [2] - Tesla's future AI6 chip, which will utilize 2nm technology, is projected to generate approximately $2 billion annually in foundry opportunities for TSMC [2] Analyst Outlook - The semiconductor sector remains optimistic about TSMC, Creative Technology, and other related companies, with TSMC maintaining an "outperform" rating and a target price of NT$1,688 [2]