Investment Rating - The report maintains an "Overweight" (OW) rating for TSMC and expresses bullish sentiment towards AI-related investments, particularly in the semiconductor sector [2][4]. Core Insights - TSMC's CoWoS capacity is projected to grow over 30% year-on-year, reaching approximately 90-95k by 2026, which is favorable for both Nvidia and AI ASIC supply chains [1][2]. - There is strong demand for AI applications in China, but hardware supply constraints are identified as a significant bottleneck [3]. - The report highlights a robust growth forecast for cloud semiconductors in 2026, with TSMC's CoWoS-L capacity expected to expand to 68k, indicating strong demand for Blackwell and Rubin chips [2][8]. Summary by Sections AI Supply Chain Insights - The report indicates that Nvidia's B30 GPU shipments to China are uncertain and could impact China's AI capital expenditures [1][3]. - Chinese AI developers are considering alternatives like Huawei chips if Nvidia's B30 cannot be shipped, but they have not yet seen Huawei's 910C available for sale [3]. TSMC Capacity and Demand - TSMC's total CoWoS capacity is expected to be around 90-95k in 2026, reflecting a 33% increase from 70k at the end of 2025 [2][8]. - The report raises TSMC's CoWoS capacity forecast for 2026 from 90k to 93k wafers per month, with non-TSMC capacity remaining unchanged [8][9]. Customer Demand and Forecasts - Nvidia's CoWoS consumption is projected to remain at 580k units in 2026, with an increase in CoWoS-L consumption estimates due to strong demand [13]. - Broadcom's CoWoS consumption estimate is raised to 110k units in 2026, driven by higher demand for Meta's MTIAv3 chips [13]. AI Capex and Market Sentiment - The report anticipates that the top four US hyperscalers will generate $550 billion in operating cash flow in 2025, supporting ongoing investments in AI-related data centers [31][32]. - Average AI capex/EBITDA is expected to be around 50% in 2025, indicating strong financial capacity for further spending [32].

Investment 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].