TSMC Stock Forecast: TSM Reported $35.9B Revenue. Why Is Demand Still Outpacing Supply?

These Q1 numbers are nothing short of astronomical from TSMC. For a semiconductor manufacturer that has become the largest, most asset-heavy pure semiconductor company in the world, $35.9 billion in revenue year over year is still robust growth. For any other semiconductor company, achieving 66%+ margins at this scale isn’t even a reasonable expectation, as that level of profitability demonstrates leading edge process node pricing, high utilization rates across the most technologically advanced factories in the world, and a product mix heavily weighted toward the largest margin silicon designs.

TSMC said advanced technologies at 7nm and below now account for 74% of wafer revenue. Put another way, more than three quarters of TSMC’s wafer sales came from the most cutting edge technology that has no competitors at that scale. Net income jumped 58% to roughly NT$572.48 billion, illustrating that despite its massive capital expenditure program, TSMC still maintains significant earnings leverage.

The company guided capex for 2026 to $52 to $56 billion, adding fabs in Arizona, Japan and Germany at the same time that CoWoS capacity is being added to meet AI GPU demand. With that capex program, net income growing 58% means revenue growth and the resulting margin expansion driven by AI accelerators is more than offsetting the additional depreciation and operating costs resulting from that spending. This demonstrates the kind of pricing power that is beyond just volume growth.

What does it mean when TSMC is selling out its CoWoS capacity for the foreseeable future?

CoWoS, or Chip On Wafer On Substrate, refers to TSMC’s method of assembling AI chip designs onto a substrate for use in servers. The assembly is accomplished by bonding memory chips (HBM) directly onto the GPU die that performs the calculations. It’s the architecture that makes the Nvidia H100 or Blackwell chips deliver the bandwidth necessary for training massive AI models.

So the fact that CoWoS capacity is sold out into the future is the most direct measure of supply constraints for AI accelerators in any part of the entire supply chain. It means Nvidia has to wait for TSMC to make CoWoS before shipping chips, and Nvidia can’t make more chips than TSMC can make CoWoS packaging for. As a result, management is accelerating the plans for building more CoWoS capacity.

The second component of TSMC’s technological advantage, though, is 2 nanometer. In the second half of 2026, TSMC said it’ll begin risk production and in 2027, it’ll be at high volume. At 2 nanometers, TSMC said the performance and power savings is more than sufficient that all of its top customers, from Nvidia, AMD, Apple, Broadcom, and Marvell, and all of the custom silicon chips that the hyperscalers are building (which will be used in AI data centers as well) will have to migrate their designs to 2 nanometers.

That is, unless the customers want to make chips with performance that trails behind their competitors. That migration to 2nm provides a multiyear volume ramp for TSMC at the most expensive and high margin chips on the planet. TSMC has said it expects AI revenues will grow from its 2024 baseline at a high 50s percent rate through 2029. 2027 will be the year that 2nm ramps up to high volume, which puts it squarely in the latter half of that growth period.

TSM is at $426.80 after a 2.80% bullish session with rising volume on the daily time frame, trading inside a rising blue channel and a higher high-highs, higher lows, a bullish pattern that implies continuation of that move to $450 to $463. RSI at 50 to 60 is not overbought.

The 50-day EMA, $396.90, and the 200-day EMA, $333.19, are the next support areas below. If the stock closes its next daily session above $433.95, the resistance cluster that’s been building in this area will clear out, enabling the stock to continue rising to the $450 to $463 extension levels. A break below the 50-day moving average of $396.90 is the invalidation point for the pattern.

Trade Details

Long entry above $433.95, which clears near-term resistance levels.

Initial target at $450, extension targets at $463 and $479.

Stop loss is at a daily close below the 50-day EMA at $396.90.

TSMC's First Quarter 2026 Results

Revenue for the first quarter came in at $35.9 billion, net income for the period surged 58 percent to around NT$572.48 billion, gross margin was 66.2 percent and operating margin was 58.1 percent. Technologies at 7nm and below accounted for 74 percent of the revenue on wafers, and High Performance Computing accounted for 61 percent of total revenue.

TSMC now sees FY 2026 revenue growth of greater than 30 percent in dollar terms. Second quarter revenue guidance is $39.0 to 40.2 billion and capex guidance for the full year is $52 to 56 billion, targeting the high end for capacity expansion in Arizona, Japan and Germany.

What is CoWoS? Why does TSMC's CoWoS Capacity Matter for AI and TSM?

CoWoS stands for Chip on Wafer on Substrate and it is TSMC's advanced packaging technology that puts the HBM memory in direct proximity to the GPU chips on a single package. This is necessary for the amount of memory bandwidth required by large AI models to be trained. The H100 GPUs from Nvidia and the newer Blackwell GPUs require CoWoS packaging.

Because CoWoS capacity is sold out well into the future this means that Nvidia is limited to how many AI GPUs can be delivered by TSMC's ability to package them, making it the bottleneck on how many AI GPUs can be supplied. This is why TSMC's accelerated expansion of CoWoS capacity is very important.

Is TSMC a Buy at $426 after its 2.80% session gain?

The technical analysis looks constructive with TSM trading within an ascending channel and above its 50-day exponential moving average (EMA50) at $396.90, RSI 55 to 60 with no divergence. A long position above $433.95 has a price target of $450 and $463 with a stop loss below $396.90.

Fundamentally, it's impressive seeing that first quarter revenue was $35.9 billion with a gross margin of 66.2 percent, full year 2026 growth raised to above 30 percent, the CoWoS capacity sold out for the future and the 2nm starting risk production in the second half of 2026 giving the bullish case more depth. The only structural risk remaining is the geopolitical tensions related to the Taiwan Strait requiring position size discipline despite the quality of the fundamentals.

TSMC delivered first quarter revenue of $35.9 billion and gross margin of 66.2 percent with net income rising 58 percent to around NT$572.48 billion, it raised full year 2026 revenue growth to over 30 percent growth in dollar terms and CoWoS AI GPU packaging capacity is sold out well into the future. The next technological inflection will be the 2nm node starting risk production in the second half of 2026 with volume expected in 2027.

AI-related revenues from 2024 to 2029 are forecast to grow at a CAGR in the high-50s. At $426.80 it is trading inside an ascending channel and above the EMA50 (50-day exponential moving average) with RSI (Relative Strength Index) neutral-bullish. The trade above $433.95 has a price target of $450 and $463. There's the geopolitical risk factor with respect to the Taiwan Strait and this would need to be reflected in the position size regardless of the quality of the fundamentals.