This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
Investment bank Goldman Sachs is optimistic that the Taiwan Semiconductor Manufacturing Company (TSMC) stands to face strong AI demand in the future due to easing constraints in the downstream supply chain. While TSMC is responsible for manufacturing advanced AI processors, server manufacturers downstream of the supply chain are eventually responsible for shipping final products. On this front, Goldman holds the view that downstream server yields have improved, which reduces the risk of a slowdown in TSMC's chip orders. However, the bank believes that the Taiwanese firm's 2026 capital expenditure might be lower than market estimates due to a slowdown in the second wave of the 2-nanometer process adoption.
Bank Of America Maintains Buy Rating & NT$1,250 Share Price Target For TSMC
The first phase of products from TSMC's advanced and leading-edge manufacturing processes are typically for lower power use cases such as smartphones and personal computers. As the chips' power consumption, efficiency and yields improve through regular mass production, they are used in higher power use cases such as High-Performance Computing (HPC).
Goldman's comments about TSMC's 2-nanometer process speculate that the firm might see a slowdown in these second-phase use cases. The Taiwanese firm is currently set to mass produce 2-nanometer chips in 2025, with the first batch of orders believed to be ordered by Apple.
Goldman shares that the slowdown in the second wave could affect TSMC's operating outlook for 2027 and 2028 and lead to the firm's capital expenditures dropping as well. The bank estimates TSMC will spend $40 billion in capital expenditures in 2026, which is less than the market estimate of $45 billion.
However, the bank is optimistic about the current demand for AI chips. It believes that server racks being manufactured downstream in the AI supply chain have improved their yields. Consequently, TSMC might not face a demand drawdown, which might had been the case if server manufacturers were unable to insufficiently digest their existing inventory.
Consequently, the bank concludes that while geopolitical risks do carry the chance of disrupting TSMC's operations, investor sentiment surrounding a slowdown in AI is improving. As for the 2-nanometer process, it believes that demand from smartphones and PCs is strong and should drive TSMC's revenue and profit growth in 2026.
Goldman is joined by Bank of America in remaining optimistic about AI demand. BofA notes that TSMC enjoys key and strong partnerships with NVIDIA and Foxconn in the AI supply chain. These partnerships provide the firm a key position in the supply chain, which leads BofA to set a NT$1,250 share price target and a Buy rating for TSMC's shares.
Goldman Sachs' report follows its discussions with more than 80 investors as part of roadshows in the US and Taiwan. Apart from TSMC, other firms that the bank believes can benefit from AI are MediaTek, ASE Technology and WinWay Technology. ASE ASE and WinWay provide semiconductor packaging, testing and IC test interfaces and benefit from higher orders from TSMC if there is robust downstream demand for AI chips.
About the author: Ramish is a seasoned technology writer and editor with more than a decade of experience. He specializes in semiconductor fabrication and market analysis. With a background in finance and supply chain management - via his bachelors in Finance and a micromasters in supply chain management from MIT - Ramish combines financial rigor with deep industry insight to deliver accurate and authoritative coverage.
Follow Wccftech on Google to get more of our news coverage in your feeds.
