TSMC’s blowout quarter, guidance, and capex plans send AI to the sky
TSMC’s stellar Q4 results, bright Q1 guidance, and willingness to spend way more on capital expenditure than analysts had anticipated this year are giving a big jolt to the AI trade.
“We believe the strong 1Q26 guidance has likely surprised many investors to the upside,” wrote Needham analyst Charles Shi, who boosted his price target on the stock to $410 from $360 in the wake of these results. “Solid CapEx guidance should also lead to even stronger wafer fab equipment (WFE) outlook for 2026 and beyond.”
Beyond TSMC, the results are boosting other stocks tied to AI:
ASML, the Dutch lithography specialist that sits at a key choke point in advanced chip design.
Memory storage stocks Western Digital, Sandisk, and Seagate Technology Holdings.
Server companies Super Micro Computer and Dell.
AI chip stocks Nvidia, Broadcom, and Advanced Micro Devices, as well as memory chip specialist Micron.
No single quarter of corporate earnings or guidance is sufficient proof against (or in favor of!) any kind of AI bubble, particularly when the biggest drivers of capex have consistently said the risk is spending too little rather than too much.
But TSMC is keenly aware of the potential downside of overextending itself into a future air pocket in demand, and has engaged in long-term planning and channel checks downstream to better understand the market for its products.
If TSMC’s capex plans aren’t executed well, it would be a “big disaster” for the company, CEO CC Wei said on the conference call.
But engaging with customers over their production needs for new wafers is being done “at least two to three years in advance,” he added.
“I spent a lot of time in the last three, four months talking to my customers and then my customers’ customers” to make sure that demand is real, said Wei, who came away “quite satisfied with the answer” and was shown “the evidence that the AI really helped their businesses.”
