TAIWAN FIRST TO MARKET

Research evidence excerpt

TAIWAN FIRST TO MARKET

Asia Pacific Equity Research

Taiwan First to Market 17 July 2026

Top Stories

TSMC (Gokul Hariharan) (2330 TT, OW)

Rising confidence in AI demand, matched by increasing capex plans; Raise PT to NT$3200

We came away from TSMC’s 2Q26 earnings conference incrementally more confident on the sustainability of Datacenter AI

demand, the company’s commitment to continue investing strongly to narrow the large supply-demand gap in leading edge,

and believe that the company’s competitive edge is intact, despite rising competitive noise. Near-term GMs may have been

slightly disappointing vs. market expectations, but we believe that GMs should stay on a slowly upward sloping curve once N2

dilution winds down, due to price increases, better operating efficiency and continued high utilization. We raise our FY 26/27/28

EPS ests by 4%/2%/6% to reflect faster revenue growth due to stronger AI demand and faster capacity growth, and remain OW

with our Jun-27 PT raised to NT$3200 (20x 12m forward earnings) . In the near-term, concerns over the AI investment cycle

duration is likely to dominate investor discussions, and we think more assurance on capex growth into 2027 from key

hyperscalers in the upcoming 2Q earnings season would be a key catalyst for the stock.

2Q26 First Take: Upside in FY26 revenue guide and capex; GMs slightly lower than market

expectations

Our First Take: TSMC's 2Q earnings came in better than expected, helped by strong operating leverage (driving OP margins

to 60+% for the first time), while revenue and GMs came in at the top of the guidance range. The positive surprises came from

the revenue guidance upgrade (to 40+% YoY) in 2026 and the capex upside ($60-64 bn in 2026, with significant upside in