HSBC maintains TSMC Buy rating and raises target price to TWD2,700

Overview

This is an HSBC company research report on TSMC published on 2026-04-14. The report maintains a Buy rating on TSMC and raises the Taiwan-listed target price from TWD2,400 to TWD2,700. The core view is that TSMC's near-term earnings are likely to meet or exceed the high end of guidance, advanced foundry capacity is tightening, FY26-FY27e capex momentum is stronger, and AI and server demand can support high revenue growth over the next several years.

Core views

HSBC believes TSMC's bullish momentum will continue. 1Q26 revenue was TWD1,134bn, up 8% QoQ and 35% YoY, slightly above the company's TWD1,093-1,131bn guidance range; 1Q26e gross margin is expected to be 65%, at the high end of guidance. The report expects 2Q26e revenue to continue growing 8% QoQ, with gross margin holding at 65%. Looking to the medium term, tighter advanced foundry capacity, customers such as AMD and Nvidia looking for additional capacity support, and Intel Foundry's efforts to win new customers all point to tight supply at the high end of manufacturing; HSBC therefore raises TSMC FY26e and FY27e capex and expects FY26/27e revenue to grow 33%/27% YoY.

Analysis framework

The report combines earnings previews, capex trends, industry supply-demand tightness, customer demand, and a comparison with consensus expectations to form the investment view; on valuation, it uses a target P/E approach, applying a 27x target P/E to forward 2H26-1H27e EPS.

Methodology notes

• Valuation methodsTarget P/E method

  Apply a 27x target P/E to rolling EPS to derive the Taiwan share price target.

  HSBC applies an unchanged 27x target P/E to 2H26-1H27e EPS of TWD100.97 to derive a rounded TWD2,700 target price; the report argues that strong AI demand, stronger pricing power, and rising costs can support TSMC price increases, making the multiple reasonable.

• Earnings forecastQuarterly earnings preview and consensus comparison

  Compare company guidance, HSBC forecasts, and market consensus.

  The report compares 1Q26 revenue, gross margin and EPS, as well as 2Q26 revenue growth and gross-margin expectations, against company guidance and market consensus to support the Buy rating and target-price increase.

• Capex analysisAssessment of advanced foundry capacity tightness

  Use customer demand, peer capacity absorption, and overseas manufacturing plans to assess capex upside.

  The report argues that tighter advanced foundry capacity and stronger customer demand to diversify manufacturing footprints support greater capex spending in front-end, back-end, and overseas capacity.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• TSMC / Taiwan Semiconductor Manufacturing Co Ltd (2330.TW; TSM US)

  Core coverage name

  Strengths

  Strong AI and server demand, tight advanced-node foundry capacity, strong pricing power, and high revenue growth and capex sustainability.

  Weaknesses

  Overseas fab expansion may pressure gross margin, and investment in advanced nodes increases depreciation expense.

  Comparison

  FY27e revenue and EPS are 2.1% and 2.0% above consensus, respectively; FY27e capex of USD70bn is above consensus USD60bn.

  Risks

  5nm orders below expectations, slower-than-expected ramp and yield improvement at advanced nodes, and heightened U.S.-China trade tensions.

• AMD (AMD US)

  Company related to customer demand for advanced foundry services

  Strengths

  The report notes that AMD and other customers are looking for additional foundry support, reflecting tight advanced capacity.

  Weaknesses

  No company-level fundamental analysis is discussed in this report.

  Comparison

  Together with Nvidia, it is cited as an example of a customer driving tight demand for advanced foundry capacity.

  Risks

  Customers shifting to other foundry sources could reflect supply tightness and may also affect TSMC order allocation.

• Nvidia (NVDA US)

  Company related to customer and AI demand

  Strengths

  Strong AI demand is an important support for TSMC's pricing power and capex upgrades.

  Weaknesses

  No company-level fundamental analysis is discussed in this report.

  Comparison

  Together with AMD, it illustrates strong demand for high-end foundry capacity.

  Risks

  A slowdown in AI demand would weaken TSMC's revenue growth and support for capex.

• Intel (INTC US) foundry

  Potential competitor and industry supply watch item

  Strengths

  The report says Intel Foundry appears to be approaching multiple new customers, highlighting tight advanced foundry supply-demand conditions.

  Weaknesses

  Relative to TSMC, its customer expansion is still at an observation stage.

  Comparison

  Intel Foundry is seen as one of the alternative options for customers seeking diversified manufacturing sources.

  Risks

  If Intel Foundry wins more customers, it could increase advanced foundry competition in the long run.

Key data

• Report date2026-04-14Market data as of the close on 2026-04-13; report issued at 2026-04-13 15:28 GMT.
• Rating and target priceBuy; TWD2,700Prior target price was TWD2,400, implying 35.7% upside.
• Current share priceTWD1,990As of 2026-04-13.
• 1Q26 revenueTWD1,134bnUp 8% QoQ and 35% YoY, slightly above the company's TWD1,093-1,131bn guidance.
• 1Q26e gross margin65%At the high end of guidance, above the consensus 64.2%.
• 1Q26e EPSTWD20.71HSBC expects 6% QoQ growth.
• 2Q26e revenue growth+8% QoQAbove consensus of about +7%.
• FY26e capexUSD56bnRaised from USD54bn; company prior guidance was USD52-56bn.
• FY27e capexUSD70bnRaised from USD64bn, above consensus USD60bn.
• FY26/27e revenue growth33% / 27% YoYMainly supported by AI and server demand.
• FY23-28e revenue CAGR29%With FY28e added, HSBC expects five-year revenue CAGR to remain at a high level.
• Target P/E27xApplied to 2H26-1H27e EPS of TWD100.97.
• ADR target priceUSD502.03Based on a 5:1 conversion ratio, HSBC TWD/USD forecast of 32.0, and a one-year average 19% premium.

Impact & implications

The investment implication for TSMC is positive: high near-term earnings visibility, tighter supply-demand balance in advanced nodes and AI server demand strengthen pricing power and capex sustainability, and the target-price increase reflects earnings roll-forward and valuation support. For the semiconductor supply chain, if TSMC expands FY27e capex, related advanced equipment, materials, advanced packaging and overseas fab construction chains may continue to benefit; however, higher capex also brings depreciation pressure and execution risk.

Risks

• 5nm orders below expectations.
• Heightened U.S.-China trade tensions, and tighter shipment restrictions on companies with mainland China exposure.
• Slower-than-expected ramp-up in advanced-node production and yield improvement.
• Rising depreciation costs from advanced-node investments.
• Overseas fab expansion may pressure margins.
• Weak consumer electronics demand may partially offset the strength in AI and server demand.

What to watch

• TSMC's analyst meeting on 2026-04-16 for the latest guidance on 2Q26 revenue, gross margin, and capex.
• Whether FY26e capex approaches or exceeds USD56bn, and whether FY27e capex moves toward USD70bn.
• AI server demand, order trends from customers such as AMD and Nvidia, and whether the tight supply-demand balance in advanced nodes persists.
• The impact of overseas fab expansion on gross margin and depreciation costs.
• 5nm and more advanced node orders, yield ramp, and capacity utilization.
• Changes in U.S.-China trade restrictions and their impact on customer shipments and manufacturing footprint decisions.