Bernstein: Higher in-house CPU demand forecasts put TSMC's 2028 related revenue at 50 billion dollars

Why are CPUs becoming a new source of growth?

Bernstein expects TSMC's CPU-related revenue to rise from about 24 billion dollars in 2026 to about 50 billion dollars in 2028, with a greater contribution from Amazon's and Google's in-house CPUs. The measure excludes Apple's in-house CPUs for PCs.
The firm believes agentic workloads are accelerating CPU demand, particularly for in-house chips deployed by the two cloud providers. These CPUs are used for general-purpose computing and, together with custom accelerators for AI training and inference, generate demand.
Specifically, Amazon designs Graviton5 itself and manages production arrangements; Google designs its second-generation Axion itself and entrusts production arrangements to partners. Bernstein expects the latter to ramp up rapidly from the end of 2026 through 2027.

Bernstein has raised its N3 and N2 revenue forecasts: AI accelerators, CPUs and high-end smartphone chips all use these advanced process technologies, and demand has improved.
Meanwhile, demand for phones and PCs is weaker than the firm expected, with particular weakness in low-end products, leaving demand for N5 and N7 slightly soft. Strength in advanced process technologies does not mean that all nodes are improving in tandem.
The firm expects A14 to begin contributing substantial revenue in the second half of 2028, with revenue at the same stage of development exceeding that of N2 and earlier process technologies. Apple, Qualcomm, MediaTek and AMD are expected to be among the first customers, while Nvidia is expected to adopt it in 2029.

Following higher demand expectations, Bernstein raised its forecast for TSMC's 2027 capital spending to 77 billion dollars, above its estimate of 63 billion dollars for 2026. The firm still expects capital spending as a share of revenue to decline gradually.
The firm also modestly raised its forecast for CoWoS advanced packaging capacity and expects assembly and test providers such as ASE and Amkor, as well as Intel, to provide more equivalent capacity. Substrate yields for Intel's EMIB-T need to improve; the firm believes progress is in line with expectations.
Bernstein expects N2 and overseas production to weigh on margins, so margins in its model remain broadly flat from 2026 to 2028, with revenue growth the main driver of earnings growth.

Bernstein expects TSMC's US-dollar revenue to grow by 44%, 40% and 27% in 2026, 2027 and 2028, respectively; revenue and earnings per share are both expected to grow at a compound annual rate of around 35% from 2026 to 2028.
The firm raised its 2027 earnings-per-share forecast from 144.8 New Taiwan dollars to 157.8 New Taiwan dollars, about 6% above market consensus; its 2028 forecast is 206.4 New Taiwan dollars, about 10% above consensus.
Bernstein maintained its Outperform rating and retained a forward one-year price-to-earnings multiple of 20 times, raising its target price for the Taiwan-listed shares from 3300 New Taiwan dollars to 3828 New Taiwan dollars, implying upside of about 67% from the closing price on 3 November 2026.