Bank of America Raises TSMC Capex Forecast on Chip Demand

Investing.com -- Bank of America analysts increased their capital expenditure forecast for Taiwan Semiconductor Manufacturing Company (NYSE: TSM) to $75 billion for 2027, up from the previous estimate of $63 billion and street consensus of $65 billion.

The upgrade follows TSMC's board of directors approval of capital appropriations totaling $31 billion, with 53% allocated to advanced front-end node capacity expansion, up from 37% in 2024-2025. The remaining 39% will fund fab construction, down from 50% in the previous period.

Bank of America said the budget shift toward front-end expansion indicates TSMC is preparing for equipment delivery for advanced node production as facilities and clean rooms become operational. The analysts expect TSMC to meet its 2026 guidance of $56 billion in capital expenditure.

The increased spending is supported by demand for high-performance computing applications, GPUs, ASICs, x86 and ARM-based server CPUs, and networking switches, according to the report.

TSMC's Arizona operations generated NT$39 billion in sales and NT$19 billion in net profit during the first quarter of 2026, compared to NT$67 billion in sales and NT$16 billion in net profit for all of 2025. The facilities recorded net losses of NT$11 billion and NT$14 billion in 2023 and 2024.

Bank of America noted that with limited government grants in the first quarter of 2026, Arizona operations achieved approximately 45% operating margins excluding grants, below the corporate operating margin of 58%.

Bank of America maintained its Buy rating on TSMC with a price target of NT$2,560, based on 20 times 2027 price-to-earnings ratio. The current valuation stands at 17 times 2027 earnings, within the historical range of 11 to 21 times.

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