The company behind chip leaders like Nvidia raised its spending forecast
Robust earnings results from Taiwan Semiconductor Manufacturing Co. just gave a huge lift to the artificial intelligence trade. TSMC on Thursday posted a 35% year-over-year increase in profit for its fourth quarter, handily beating Wall Street’s estimates and hitting a fresh record. Its high-performance computing division, which includes artificial intelligence and 5G applications, made up the majority of sales for the quarter. TSMC is the world’s largest dedicated contract chipmaker: It manufactures the advanced AI chips that “fabless” companies like Nvidia design. Nvidia, Broadcom and Advanced Micro Devices are among TSMC’s clients. Relentless AI demand is expected to push TSMC’s spending even higher, lifting Wall Street’s sentiment on the sector. The company said that its capital expenditures were expected to reach between $52 billion and $56 billion in 2026, as compared to $40.9 billion in 2025. TSM 1Y mountain Taiwan Semiconductor Manufacturing stock performance over the past year. Shares of TSMC jumped more than 5% on Thursday, bringing their year-to-date gain to about 13%. Several big-name chip stocks also rose during the session on the back of TSMC’s blowout results: Nvidia and Broadcom jumped 3% and more than 1%, respectively, while the VanEck Semiconductor ETF (SMH) hit a fresh 52-week high. TSMC’s results lift other AI-related plays Not only did Wall Street analysts reiterate their bullish ratings on TSMC, they also boosted their outlook on other AI plays that could see a boost from the chip fabricator’s business. TSMC results showed “broad-based strength” as the company upped its AI accelerator growth forecast for 2024 through 2029, Wells Fargo analyst Aaron Rakers said Thursday on CNBC’s “The Exchange.” “It talks to the strength that we continue to see in the AI infrastructure buildout … we’re moving from heavy AI training investment cycle to inference starting to proliferate, and that’s carrying the chip sector,” he said. Rakers moved to an overweight rating on Broadcom and named AMD as a top pick for 2026 Thursday morning as he remains constructive on semiconductor revenue growth and data center compute demand. Wedbush Securities analyst Matt Bryson, who kept his outperform rating on TSMC, similarly named Nvidia, Broadcom and C3.ai as derivative plays from the results. “The solid Q1 outlook, strong 2026 guide and 5 year AI accelerator [compound annual growth rate] expectations necessarily imply strong continued orders for these vendors,” he said. Like Wedbush, JPMorgan and Barclays also reiterated their outperform and overweight ratings on TSMC upon the chipmaker’s report. Bank of America, UBS and Needham each kept their buy ratings. JPMorgan analyst Gokul Hariharan said that TSMC’s report reflected strong improvement in gross margins and a greater confidence in long-term AI compute. “TSMC has signaled that it is fully embracing this AI upcycle, responding to repeated customer demand for increased leading edge capacity with a strong capex increase (2026E capex likely 30+% higher than 2025, and 50% higher than past cycle peak capex in 2022). This also highlights the increased confidence in AI demand in the next few years,” he wrote in a Thursday note to clients. “We believe the stock should continue to move higher given better [gross margins] and stronger growth into 2026-27.” Similarly, Barclays analyst Simon Coles spotlighted TSMC’s results and noted the company’s bullish view on AI industry demand. “Management also reassured around AI bubble concerns, at least in the sense that they see the demand as real and have been checking directly in detail with customers and customers’ customers. All in all, another strong set of results to further support the positivity around AI for semis,” he said in a note. TSMC is Coles’ preferred overweight pick in the semiconductor group, mostly due to company’s strong expectations for revenue growth this year.
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