J.P. Morgan raises Alchip Technologies target price to NT$6,000 and maintains Overweight

Overview

This is a company research and rating-adjustment report on Alchip Technologies (3661.TW). On the back of strong 1Q26 results, accelerating Trainium 3 demand, smooth Trainium 4 project progress, and potential new hyperscaler customer opportunities, J.P. Morgan maintains an Overweight rating and raises the Jun-27 target price to NT$6,000.

Core views

The core view of the report is that Trainium 3 will become the most important revenue driver in 2026 and 2027, although near-term upside is constrained by TSMC N3 wafer supply; Trainium 4 is expected to tape out on schedule at the end of 2026 and may drive a clear additional rise in EPS in 2028; over the longer term, as hyperscalers move from traditional models to CoT mode, cost-efficient, IP-neutral Alchip is expected to benefit.

Analysis framework

The report applies a review of company performance, supply chain checks, judgment on project mass-production pace, revisions to revenue and margin forecasts, and a relative valuation framework. Valuation is based on 25x 12-month forward P/E, with the target multiple increased by two notches from previous levels due to stronger Trainium project pipeline and higher odds of converting potential hyperscaler orders.

Methodology notes

• equity_valuationforward_pe

  12-month forward P/E valuation

  The target price of NT$6,000 is based on 25x 12-month forward EPS. The multiple is below the historical five-year average but above prior target multiples, reflecting stronger Trainium project visibility and broader potential customer expansion.

• earnings_revisionforecast_revision

  earnings forecast revision

  The report raises 2026 revenue, gross margin, operating profit, and EPS forecasts, while lowering the 2027 revenue forecast, mainly reflecting Trainium 3 demand, wafer supply constraints, and changes in project ramp-up timing.

• industry_supply_chainsupply_chain_check

  supply chain validation

  The report assesses Trainium 3 demand, TSMC N3 wafer allocation, competitor participation nature, and the backend design services role on Trainium 4 through a supply-chain check.

Asset mapping & comparison

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

• Alchip Technologies (3661.TW)

  Covered name; J.P. Morgan maintains Overweight and raises target price

  Strengths

  Strong Trainium 3 demand, clear backend design role for Trainium 4, long-term benefits from CoT model, and potential new hyperscaler customers entering late stages.

  Weaknesses

  Near- to medium-term revenue remains highly concentrated in AWS-related projects, and in 2026 additional upside is constrained by TSMC N3 wafer supply limits.

  Comparison

  The report views other competitors entering the supply chain as mostly wafer procurement roles rather than replacements for Alchip's design or integration work.

  Risks

  Dilution from equity issuance, shipment limits on Li Auto autonomous driving project, insufficient wafer allocation, customer concentration, and project schedule delays.

• TSMC

  Critical wafer supplier

  Strengths

  The availability of N3 and future advanced nodes determines Trainium 3 and Trainium 4 ramping capacity.

  Weaknesses

  N3 wafer supply limits may constrain upside in 2026.

  Comparison

  AWS may obtain spare wafer allocation from TSMC through other fabless vendors.

  Risks

  If final wafer allocation in 2027 is lower than expected, it would cap Alchip's revenue upside.

• AWS Trainium 3 / Trainium 4

  Core project drivers for Alchip

  Strengths

  Trainium 3 is expected to ramp strongly in 2H26; Trainium 4 is more complex and expected to have ASP at least double that of Trainium 3.

  Weaknesses

  Project progress, taping timeline, and customer procurement pace have a large impact on revenue recognition.

  Comparison

  Trainium 4 has higher complexity and pricing than Trainium 3 due to a 2nm compute die, 3nm chiplets, and larger package area.

  Risks

  Delayed taping, volume production yield issues, customer demand changes, or interconnect solution changes.

Key data

• Target priceNT$6,000Jun-27 target price, based on 25x 12-month forward P/E.
• RatingOverweightJ.P. Morgan maintains an Overweight rating.
• 1Q26 gross margin50.2%At a historical high, above JPMe 41.7% and consensus 40.2%.
• 2026E revenueNT$84,210mnRaised by 4% from prior forecast of NT$80,693mn.
• 2027E revenueNT$119,908mnLowered by 12% from prior forecast of NT$135,985mn.
• 2028E revenueNT$163,809mnDriven by Trainium 4 and new project contributions.
• 2026E adjusted EPSNT$175.42Expected year-over-year growth of 153.9%.
• 2028E adjusted EPSNT$272.24The report expects 2028 EPS to be more than 50% higher than in 2026.
• Trainium 3 revenue contributionabout 60% of 2026 company revenueThe report expects Trainium 3 to be the core revenue source in 2026.
• Trainium 3 lifecycle shipment assumption4.4mn unitsJPMe's estimate for Trainium 3 lifecycle units.

Impact & implications

If the report thesis is realized, Alchip's earnings structure would gradually shift from a short-term high share of NRE to a large-scale Trainium 3 turnkey mass-production ramp, followed by growth handed off by Trainium 4 and new hyperscaler projects. For investors, the key implication is that the valuation support comes increasingly from medium- to long-term AI ASIC project visibility, rather than a one-quarter gross margin peak.

Risks

• Dilution may occur if new shares are issued to fund working capital for the N3 project.
• The Li Auto autonomous driving project may face shipment restrictions.
• Insufficient TSMC N3 wafer supply may constrain revenue upside for Trainium 3 in 2026 and 2027.
• AWS-related revenue concentration is high, so changes in orders or project timing could amplify earnings volatility.
• If Trainium 4 taping, volume production, and turnkey revenue recognition are delayed, expected 2028 growth may be impacted.

What to watch

• Whether Trainium 3 enters volume production as scheduled in late May or early June 2026.
• Whether Trainium 3 monthly revenue in Aug-Sep 2026 reaches the peak level expected in the report.
• The final allocation results for TSMC N3 wafers in 2027 announced by AWS in July 2026.
• Whether Trainium 4 tapes out as scheduled by year-end 2026 and contributes turnkey revenue in late 2027 or early 2028.
• Whether potential new hyperscaler customers progress from late-stage engagement to formal order stage.
• Whether 2Q26 gross margin remains around the report's expected 39%, and whether 2H26 turnkey gross margin remains in the upper-to-mid double digits.