TSMC's Capacity Crunch Deepens as Demand Swamps Both Advanced Nodes and Packaging

TSMC shares dip 3.28% weekly ahead of Q2 results, but demand for advanced chips keeps capacity booked through 2027, prices rising, and S&P upgrades rating to AA-.

Taiwan Semiconductor Manufacturing Co. ended the week in the red, yet the stock's modest pullback stands in stark contrast to a drumbeat of bullish signals that range from fully subscribed manufacturing lines to a credit-rating upgrade. The shares closed Friday at €383.00 in European trading, edging up 0.13% on the day but posting a 3.28% weekly loss as investors adopted a cautious stance ahead of second-quarter results due in July.

The caution, however, is not rooted in any deterioration of fundamentals. Rather, it reflects a wait-and-see posture before the company reports June revenue — delayed by a typhoon in the Pacific region — and delivers its strategic briefing. Analysts expect monthly sales to hit a record above TWD 400 billion, while consensus for the full second quarter points to revenue in a range of $39 billion to $40.2 billion, a sharp year-on-year leap powered by relentless AI infrastructure spending.

Demand for TSMC's most advanced capabilities is running so hot that supply is effectively spoken for years in advance. The company's CoWoS advanced packaging capacity, critical for modern AI accelerators, is reported to be fully booked through 2027. Separately, the upcoming 2-nanometer node, designated "N2," has already sold out its entire 2026 production run, with Apple and Nvidia securing the lion's share of first-generation wafers. Rival Rapidus of Japan is touting cheaper 2nm alternatives for 2027, but the gap has done little to dent TSMC's pricing muscle.

That muscle is on full display across the board. The foundry giant is reportedly lifting prices by 5% to 10% on its 3nm, 5nm, and 7nm processes, taking advantage of an enduring supply-demand imbalance in the AI chip market. South Korea's Samsung has followed suit, raising its foundry prices by roughly 15%. The pricing environment, combined with TSMC's roughly 70% share of the advanced-chip market, provides a powerful tailwind for margins — some analysts are now asking whether gross margin could breach the 70% threshold in the upcoming report.

Financial strength is further underscored by S&P Global's decision to upgrade TSMC's long-term credit rating to AA-, citing an exceptional balance sheet that sustains robust free cash flow even as capital spending climbs. For the current fiscal year, capex is expected to land at the upper end of the $52 billion-to-$56 billion guidance range, funding an aggressive global expansion that includes six factories at the Arizona site alone, where total investment is projected at $165 billion.

The stock's short-term drift masks a powerful longer-term trend. At €383.00, the shares sit 8.92% below the 52-week high of €420.50 reached in early July, but they remain 40.29% higher year-to-date and have surged 94.81% over the past twelve months. Technical indicators point to a neutral posture: the relative strength index stands at 50.7, the price is 3.63% above its 50-day moving average of €369.57, and well clear of the 200-day line at €294.14. Market capitalisation hovers near €1.98 trillion.

All eyes now turn to the mid-July earnings release, when management is expected to provide an updated outlook. The key question for investors is whether TSMC will raise its full-year growth forecast above the current 30% target — a move that would validate the enormous capital flows already pouring into the semiconductor sector, exemplified by SK Hynix's $26.5 billion US depositary receipt listing this week. Given the packed order books across both cutting-edge nodes and packaging, the odds of an upward revision appear to be stacking in TSMC's favour.