TSMC's stock price reaches new high as customer orders increase, boosting demand for capacity expansion

TSMC's stock price reached a new high on the 5th, reaching a sky-high price of 2,580 yuan in early trading, and finally rose to 2,575 yuan, an increase of 3%. (Bloomberg)

[Financial Channel/Comprehensive Report] TSMC’s stock price reached a new high today (5th). It once reached a sky-high price of 2,580 yuan in early trading, and finally rose to 2,575 yuan, an increase of 3%, pushing TSMC’s market value to NT$66.9 trillion. Foreign media pointed out that TSMC has achieved another good performance, but the strong demand from Huida and Apple has become TSMC's next problem.

As investors bet that Apple, Huida and other chip designers will keep TSMC's advanced factories operating at full capacity in the next few years, there were reports that major customers increased their orders for the 2nm process by 10% to 20%, forcing TSMC to accelerate capacity expansion. Buoyed by this news, the stock price rose in response.

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The current message is clear: TSMC is not worried about finding customers, but customers are competing for scarce cutting-edge production capacity. The next challenge is how to quickly expand to meet market demand without damaging the company's economic benefits.

Shortages are good for pricing, but filling those orders will require companies to invest heavily in scaling up costly 2nm production and expanding overseas fabs. According to EE Times, TSMC will be able to produce about 120,000 2-nanometer wafers per month by the end of 2026, higher than the previous estimate of 90,000 to 100,000 wafers.

Apple, Huida, Advanced Micro Devices, Qualcomm and MediaTek have increased orders for TSMC's 2nm process chips by 10% to 20%. TSMC will put into operation five 2-nanometer wafer fabs this year, including two in Hsinchu and three in Kaohsiung. TSMC said that the output of the 2-nanometer process in the first year should be 45% higher than the first year of the 3-nanometer process, and the annual growth rate of production capacity between 2026 and 2028 may reach about 70%.

During TSMC's July earnings call, JPMorgan Chase managing director Gokul Hariharan said that chronic supply shortage "is not a good thing for TSMC."

Continued shortages can lead to unmet revenue, frustrating customers and prompting chip designers to seek alternative sources from other suppliers such as Samsung or Intel.

TSMC CEO Wei Zhejia said that the supply gap is very large, and the company has raised its capital expenditure plan for 2026 to between US$60 billion and US$64 billion.

Stifel analyst Sahej Singh set the tone for the investor debate last month. According to StreetInsider, Singer said: We believe the debate is not about demand, but about the sustainability of short-term profit margins.

TSMC expects that the mass production of the 2-nanometer process will reduce gross profit margin by approximately 3 to 4 percentage points in the second half of 2026. In addition, the expansion of overseas foundry production capacity is expected to reduce gross profit margin by 2 to 3 percentage points in the early stage and 3 to 4 percentage points in the later stage.

Wall Street remains confident. JPMorgan Chase maintained its "buy" rating on the stock on October 1 and raised its Taiwan listing target price from NT$3,200 to NT$3,300. Stifel analyst Singer still gives TSMC a buy rating and an ADR target price of $515.

Huida and Apple can continue to place additional orders, but TSMC must first invest in producing these chips.

Morningstar expects TSMC to raise prices in 2027 due to rising raw material costs and tight supply. The agency raised TSMC's fair value estimate to NT$3,440, or US$534 per ADR, citing increased spending on hyperscale data centers that justified TSMC's larger capital expenditure plans.

TSMC plans to increase wafer foundry prices by 10% in 2027, in part to offset rising costs of materials, equipment and overseas manufacturing. The scarcity of capacity supply is a double-edged sword. It raises spending requirements and execution risks, but also enhances TSMC's ability to charge higher prices to Huida, Apple and other customers.

TSMC is about to announce its September revenue, followed by its third-quarter earnings on October 15. Investors will focus on capital expenditures in 2027, the economics of the 2nm process, artificial intelligence demand and pricing.

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