Trainium 3 volume ramp exceeds expectations; Alchip Technologies target price raised to NT$6,750

Overview

JPMorgan maintained its positive view following Alchip Technologies' 2Q26 earnings review. The report believes that Trainium 3 has ramped smoothly since entering mass production at the end of May 2026, Trainium 4 design work is progressing well, and the company has increased its participation in several key design stages. Meanwhile, Google's move toward a customer-owned tools model could create TPUv10-related turnkey business opportunities for Alchip.

Core views

The core investment thesis includes upward revisions to Trainium 3 shipment and revenue forecasts for 2027; potentially meaningful increases in the company's share and ASP in Trainium 4; turnkey business expansion not immediately eroding gross margin, with operating leverage supporting profitability; and Google TPUv10, while not contributing revenue in the near term, improving customer concentration and serving as a medium- to long-term catalyst.

Analysis framework

The report combines quarterly results, management guidance, supply-chain research, project mass-production schedules, revisions to revenue and profit forecasts, and 12-month forward P/E valuation.

Methodology notes

• Relative valuation12-month forward P/E

  The target price is based on 25x 12-month forward P/E

  The report applies a 25x 12-month forward earnings valuation to derive a June 2027 target price of NT$6,750; this valuation multiple is below the company's five-year historical average.

• Earnings forecast revisionsRevenue, EPS, and margin forecasts

  Forecast upgrades driven by project production schedules and operating leverage

  The analysis maps assumptions for Trainium 3 and Trainium 4 production, share, and ASP to revenue, EPS, and margin forecasts, while considering supply and working-capital constraints.

• Scenario and optionality analysisGoogle TPUv10 business optionality

  Potential opportunity from new customers and project participation

  Google TPUv10 has not yet generated a specific revenue forecast, but if Alchip secures back-end design or turnkey production orders, it could become a valuation catalyst from 2029 to 2030.

Asset mapping & comparison

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

• Alchip Technologies（3661.TW）

  Core covered company in the report

  Strengths

  Smooth Trainium 3 mass production, increased participation in Trainium 4 design, resilient gross margin, and operating leverage supporting profit growth.

  Weaknesses

  Revenue expansion depends on advanced-process wafers, CoWoS, and substrate supply; a higher turnkey business mix could compress gross margin over the long term.

  Comparison

  Within ASICs, the report ranks its preference as MediaTek = Alchip > GUC, although all three companies have positive ratings.

  Risks

  AWS wafer allocation, working-capital requirements, potential dilution from equity issuance, ADAS project shipment constraints, and uncertainty surrounding Google TPU orders.

• MediaTek Inc.（2454.TW）

  ASIC peer and potential primary back-end partner for Google TPUv10

  Strengths

  The report believes it may be the primary back-end partner for the main TPUv10 project.

  Weaknesses

  No standalone financial or valuation analysis is provided.

  Comparison

  Ranked alongside Alchip as the report's top ASIC pick.

  Risks

  The actual collaboration model and order allocation remain uncertain.

• GUC（3443.TW）

  ASIC peer and potential Google TPUv10 participant

  Strengths

  May participate in part of TPUv10 back-end design, turnkey production of compute chips, or other SKUs.

  Weaknesses

  The report views its priority as lower than that of Alchip and MediaTek.

  Comparison

  The report ranks MediaTek = Alchip > GUC.

  Risks

  The scope of participation, project mass-production schedule, and order size have not yet been confirmed.

• Alphabet Inc.（US.GOOGL）

  Potential demand source for Google TPUv10

  Strengths

  A customer-owned tools model could broaden participation opportunities for pure-play design service and turnkey suppliers.

  Weaknesses

  The report believes the core back-end partner for the main TPUv10 project may not be Alchip.

  Comparison

  The project opportunity represents additional upside optionality for Alchip rather than a core basis of current earnings forecasts.

  Risks

  Supplier selection during the RFQ stage, the business model, and actual order allocation remain undetermined.

Key data

• RatingOverweightPositive rating maintained.
• Target priceNT$6,750.00The target date is June 2027; the previous target was NT$6,000.
• Reference share priceNT$4,210.00The report uses the closing price on August 14, 2026.
• FY27E to FY28E EPS revisions+3% / +16%Reflects higher Trainium 3 shipments, increased Trainium 4 participation, and Google TPU business optionality.
• Trainium 3 revenue forecastApproximately US$2.8bn in 2027The previous forecast was approximately US$2.5bn; the 2026 forecast is approximately US$1.7bn.
• 2027 Trainium 3 revenue growth65%Above the previous forecast of 56%.
• FY27E revenueNT$126,231mnRaised by 5.2% from the previous forecast of NT$119,944mn.
• FY28E revenueNT$221,721mnThe report expects 75.6% year-on-year growth, driven by Trainium 4.
• Gross margin guidanceAbove 20%Management expects to maintain this level in 2H26.
• Operating margin outlookMid- to high-single-digit rangeThe report expects support from operating leverage from 2026 to 2028.

Impact & implications

If Trainium 3 continues ramping as expected, Alchip Technologies' revenue momentum should strengthen from 2H26 through 1H27. If Trainium 4 tapes out and enters mass production as planned, and the company maintains a high design share and higher ASPs, earnings upside in 2028 could expand significantly. If Google TPUv10 orders are confirmed, this would help reduce reliance on a single major customer, although revenue contribution is not expected before 2029.

Risks

• Tight supply of advanced-process wafers, CoWoS, and substrates could limit revenue upside for Trainium 3 and Trainium 4.
• AWS's internal and external wafer-supply allocation could limit Alchip Technologies' actual revenue scale in Trainium 4.
• New share issuance to meet working-capital needs for N3 projects could result in equity dilution.
• The Li Auto autonomous-driving project may face shipment restrictions.
• A rising share of turnkey production business could pressure gross margin over the long term.
• The Google TPUv10 opportunity remains at a potential stage, with uncertainty over revenue timing, order share, and project scope.

What to watch

• Monthly Trainium 3 revenue ramp and changes in supply bottlenecks from 2H26 through 1H27.
• Progress of Trainium 4 tape-out at the end of 2026 and mass production at the end of 2027.
• Alchip Technologies' actual scope of participation and ASP changes in Trainium 4 back-end design, I/O chiplets, and integration.
• Whether gross margin can remain above 20% and operating margin can stay in the mid- to high-single-digit range.
• AWS wafer-allocation decisions and the company's working-capital and financing arrangements.
• Google TPUv10 RFQ progress, order confirmation, and Alchip Technologies' potential participation stages.
• ADAS chip capacity recovery and mass-production contributions from ARM CPU customers.