Research Report Analysis: TSMC’s AI Revenue to Double by 2027, CoWoS Capacity Remains a Bottleneck
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Research Report Analysis: TSMC’s AI Revenue to Double by 2027, CoWoS Capacity Remains a Bottleneck
Even if TSMC expands its CoWoS capacity to 200,000 wafers per month, it may still fall short of meeting the global demand shortfall of 2.69 million wafers.
Navigating Web3 tides with focused insightsAuthor: Rita
TideResearch Insight
Morgan Stanley released an in-depth report on TSMC’s supply chain on June 23. Key takeaways: Based on the latest supply-chain survey, Morgan Stanley has raised its forecast for global CoWoS advanced packaging demand in 2027. It now expects TSMC’s AI-related revenue to reach $8.63 billion in 2027—up 218% from $2.71 billion in 2026. While NVIDIA remains the core growth driver, AMD’s CPUs and Google’s TPUs are emerging as new engines of expansion. Most critically, even if TSMC scales up its CoWoS capacity to 200,000 wafers per month, it may still fall short of meeting the projected global demand gap of 2.69 million wafers.
TSMC’s AI Revenue Set for Explosive Growth
The numbers speak for themselves: Morgan Stanley forecasts TSMC’s AI-related revenue will hit $8.63 billion in 2027—up 218% year-on-year from $2.71 billion in 2026. This is exponential growth—not linear.
Breaking down that $8.63 billion: $2.8 billion from GPUs, $1.8 billion from custom AI chips, $4.0 billion from CoWoS advanced packaging, and $300 million from AI server CPUs. TSMC’s role in the AI chip value chain extends far beyond wafer fabrication—advanced packaging has become an equally critical revenue stream.
By 2028, this figure is expected to climb further to $10.66 billion. Over three years, TSMC’s AI business will have nearly tripled in scale. The construction of AI infrastructure is still far from saturation—and TSMC, the “shovel seller,” remains in the midst of a capacity ramp-up.
But can capacity truly keep pace?
NVIDIA remains the dominant consumer of TSMC’s CoWoS capacity. Morgan Stanley estimates NVIDIA’s Rubin and Blackwell GPUs—and its newly launched Vera CPU—will collectively consume 1.222 million CoWoS wafers in 2027, a 57% increase year-on-year.
What truly surprised Morgan Stanley, however, was AMD. AMD’s total CoWoS consumption is projected to surge 308%, rising from 120,000 wafers in 2026 to 530,000 wafers in 2027—driven by strong adoption of AMD’s Venice CPU and MI400-series GPUs in agent-based AI applications. The CPU market is being accelerated by AI—not just the GPU market.
This shift carries profound implications. Last year, market discussions centered on GPU dominance—but this year, Morgan Stanley clearly observes that data centers are expanding procurement of both GPUs and CPUs simultaneously. Even NVIDIA’s CPUs are consuming capacity, while AMD’s CPU consumption is surging. Demand for CPU compute power on the AI inference side has far exceeded expectations.
Google’s TPU Quietly Emerges as the Second-Largest Consumer
Beyond NVIDIA and AMD, Morgan Stanley specifically highlights growing demand from Google’s TPUs. Google procures CoWoS advanced packaging through two channels: MediaTek, acting as a design services partner, and Broadcom, which participates in TPU design and manufacturing. Both companies require substantial CoWoS capacity to design and manufacture Google’s TPU chips.
Morgan Stanley believes that if ABF substrate supply improves—particularly MediaTek’s T-Glass capacity ramp—the volume of TPU shipments facilitated by MediaTek for Google could be significantly revised upward. Current forecasts may therefore be conservative. Google’s ambitions for AI chips remain only partially realized.
Unbridgeable CoWoS Capacity Gap
We now return to the most critical issue: capacity.
Global CoWoS demand stood at 1.394 million wafers in 2026 and is projected to jump to 2.694 million wafers in 2027—a 93% increase. TSMC plans to expand its CoWoS capacity to 200,000 wafers per month by end-2027, while non-TSMC capacity is expected to reach 80,000 wafers per month. Combined, global CoWoS capacity would total ~280,000 wafers/month—or ~3.36 million wafers annually.
This appears sufficient—yet the problem lies in the fact that 2.694 million wafers represents only an estimated global demand, and Morgan Stanley’s survey may not yet fully capture all demand signals. Moreover, the distribution across high-end CoWoS-L and CoWoS-S variants is crucial. NVIDIA’s CoWoS-L requirement is the most advanced—and extremely tight—precisely where TSMC holds a competitive advantage.
While aggregate capacity looks adequate, at the highest-end tier of advanced packaging, TSMC remains in a state of undersupply. This grants TSMC pricing power—and explains why Morgan Stanley maintains an “Overweight” rating on the company.
Emerging Demand Catalysts Mounting
Morgan Stanley identifies three near-term catalysts. First, improved ABF substrate supply—especially the ramp-up of MediaTek’s T-Glass capacity—will directly boost Google TPU shipments. Second, validation of emerging CPU demand: NVIDIA’s Vera and AMD’s Venice CPUs are now entering mass production, sustaining CoWoS consumption. Third, ramp-up of NVIDIA’s next-generation Rubin Ultra products, with significant shipments anticipated in H2.
These catalysts collectively imply that TSMC’s CoWoS business will face no shortage of orders in 2027—the real question is whether capacity can keep pace. From this perspective, TSMC’s capital expenditure cycle is far from over.
New Winners Across the Supply Chain
The report highlights several companies worth watching. MediaTek is named the top pick, given its role as Google’s primary TPU design partner—directly benefiting from AI-driven demand growth. ASE and KYEC are reaffirmed as “Overweight”: ASE serves AMD’s Venice CPU supply chain, while KYEC supports NVIDIA’s GPU supply chain.
TSMC itself remains the core beneficiary—but Morgan Stanley emphasizes that the entire AI supply chain stands to gain, not just the chip design segment.
TSMC’s AI revenue growth is indeed extraordinary; hitting $8.63 billion in 2027 is well within reach. Yet this growth hinges on actual capacity build-out—and, most critically, whether advanced packaging capacity becomes a new bottleneck. Morgan Stanley believes it won’t—but also clearly notes that supply-chain fragmentation is intensifying, and the line separating winners from losers is being redrawn.
Disclaimer
This article is TideResearch’s summary and interpretation of a third-party brokerage research report. All referenced ratings, target prices, earnings forecasts, and related judgments reflect the views of Morgan Stanley analysts only, representing solely their affiliated institution’s stance—not TideResearch’s position—and do not constitute any investment advice.
Please note the following three points when reading: First, target prices represent analysts’ expectations for roughly the next 12 months—not commitments—and are subject to repeated revision based on financial performance and market conditions. Second, sell-side research reports are inherently bullish, and some covered companies may maintain investment banking relationships with the issuing broker. Third, the true value of a research report lies in its core logic and underlying assumptions—not in any single target price. Focus on the logic—not just the price.
Markets involve risk; decisions must be made independently. This article should not serve as the basis for buying or selling any securities.
Data source: Morgan Stanley Research Report (Charlie Chan et al., June 23, 2026) · Public market data
TideResearch · 2026 June
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