Taiwan Semiconductor Manufacturing’s advanced packaging technology, known as CoWoS, has become the critical choke point for AI accelerator production. Reports indicate that Google reduced its next-generation TPU target by 25% when it couldn’t secure sufficient CoWoS slots at TSM, a capacity now locked up more than 50% by Nvidia through priority allocations. Without enough interposer assemblies that integrate high-bandwidth memory with compute dies, finished AI chips cannot be deployed at scale. This underscores how TSM’s supply allocation, rather than chip design or raw demand, now dictates the pace at which hyperscalers can expand their data-center compute fleets.

Recognizing the surge in AI-driven demand, TSM is accelerating its investment roadmap through 2028. The company plans to double its production of advanced-node wafers and repurpose legacy fabs for advanced packaging, targeting a potential twofold increase in revenue by the end of the decade. Management has earmarked more than $40 billion in incremental capital expenditure for capacity ramps, while service revenues—tied to long-term equipment maintenance—are growing at an annualized rate exceeding 30%. These initiatives seek to alleviate the CoWoS backlog and reinforce TSM’s gross margins, currently above 55%, as AI workloads continue to proliferate.

Institutional ownership of TSM remains robust, though some funds have modestly trimmed stakes; for example, one asset manager reduced its position by just under 7% in Q3, leaving it among the top dozen holdings. Meanwhile, Wall Street analysts have lifted their earnings forecasts for the next fiscal year, with consensus revenue growth projections near 20% and average price targets reflecting a mid-double-digit premium to current levels. Seven major brokerages maintain “buy” or “outperform” ratings, citing TSM’s gatekeeper role in AI supply chains and its unmatched technology lead in both logic-node fabrication and 3D packaging services.