CoWoS capacity is expected to exceed expectations, Morgan Stanley maintains "Overweight" rating on Taiwan Semiconductor

According to Zhitong Finance APP, JP Morgan maintains an "Overweight" rating on Taiwan Semiconductor (TSM.US) with a target price of NT$1,275. JP Morgan pointed out that TSMC's CoWoS capacity is expected to reach 95,000 pieces per month (equivalent to 12-inch wafers) by the end of 2026, and further climb to 112,000 pieces per month by the end of 2027, significantly higher than previous expectations. JP Morgan noted that this expansion is mainly due to the planned capacity construction of the AP8 factory (expected to be operational in mid-2026) and the continuous growth in demand from key customers such as NVIDIA, Broadcom, and AMD. It is worth noting that starting in the second half of 2026, full-stack CoWoS packaging orders for non-AI products (such as Venice CPU and Vera CPU) will begin to shift to OSAT partners (mainly ASE), marking TSMC's increased focus on capacity allocation for the CoW (Chip-on-Wafer) segment, while the oS (on-Substrate) segment will continue to be handled by ASE. Broadcom Becomes the Fastest Growing Customer Broadcom's CoWoS allocation is expected to reach 185,000 pieces in 2026, a year-on-year increase of 93%, mainly driven by demand from Google's TPU project. JP Morgan expects TPU shipments to reach 2.5 million units in 2026 (a year-on-year increase of 38%), while Meta's first CoWoS-based ASIC (Athena) and OpenAI's ASIC project will also significantly contribute to incremental demand. Considering Broadcom's internal network chip demand, actual demand may exceed 200,000 pieces. NVIDIA Demand Exceeds Expectations Due to the increased size of the Rubin chip and strong demand for the B300, NVIDIA's demand for the Blackwell series in the first half of 2026 will remain resilient. It is expected that the production of Rubin GPUs will be around 2.9 million units in 2026, as the increased packaging size (the number of chips cut from each CoWoS wafer decreases to 9) will drive growth in CoWoS demand in the second half of the year. NVIDIA's total AI GPU production is expected to reach 6.3 million units in 2026, but exports of CoWoS-based chips to China will still be restricted. AMD's Growth Momentum Transition AMD's CoWoS demand remained stable in 2025, but will grow in 2026 with the ramp-up of the MI400/MI450 series and Venice CPU (which uses HBM and CoWoS-S packaging). The demand trend for MI350 is healthy, but the adoption progress of MI400/450 (which uses CoWoS-L) remains a key variable. Additionally, AMD will expand the application of 2.5D/wafers-level fan-out packaging in gaming GPUs and high-end server/PC CPUs in 2026/27