Author: Rita
TideResearch Insights
Morgan Stanley released an in-depth supply chain report on TSMC on June 23. The core conclusion: based on the latest supply chain survey, the forecast for global CoWoS advanced packaging demand in 2027 has been revised upwards. TSMC's AI-related revenue is projected to reach $86.3 billion in 2027, a 218% increase from $27.1 billion in 2026. Nvidia remains the core driver, but AMD's CPUs and Google's TPUs are becoming new growth engines. Most critically, even if TSMC expands its CoWoS capacity to 200,000 units per month, it may still fail to meet the global demand gap of 2.69 million units.
TSMC's AI Revenue Experiences Explosive Growth
Numbers speak loudest. Morgan Stanley predicts TSMC's AI-related revenue will hit $86.3 billion in 2027, compared to $27.1 billion in 2026, representing 218% growth. This is an exponential leap, not linear growth.
Breaking down the $86.3 billion, GPU revenue accounts for $28 billion, custom AI chip revenue for $18 billion, CoWoS advanced packaging revenue for $40 billion, and AI server CPU revenue for $0.3 billion. TSMC's role in the AI chip industry chain is not just wafer manufacturing; advanced packaging has become an equally important revenue stream.
By 2028, this number is expected to climb further to $106.6 billion. Within three years, TSMC's AI business has nearly tripled in scale. The construction of AI infrastructure is far from saturated; TSMC, as the "shovel seller," is still in the capacity ramp-up phase.
But can capacity really keep up?
Nvidia's demand for TSMC's CoWoS capacity remains the absolute main force. Morgan Stanley expects Nvidia's Rubin and Blackwell GPUs, along with its newly launched Vera CPU, will consume a total of 1.222 million CoWoS units in 2027, a 57% year-on-year increase.
What truly surprised Morgan Stanley is AMD. AMD's total CoWoS consumption is projected to surge 308%, from 120,000 units in 2026 to 530,000 units in 2027. Driving this growth is AMD's Venice CPU and MI400 series GPUs fully supporting agentic AI. The CPU market is being accelerated by AI penetration, not just the GPU market.
This shift is profound. Last year, market discussions focused on GPU dominance, but this year Morgan Stanley clearly sees data centers expanding procurement of both GPUs and CPUs. Nvidia's CPUs are also consuming capacity, while AMD's CPU consumption has surged significantly. The demand for CPU compute power on the AI inference side far exceeds expectations.
Google's TPU Quietly Becomes the Second Largest Consumer
Beyond Nvidia and AMD, Morgan Stanley particularly highlighted the demand from Google's TPUs. Google sources CoWoS advanced packaging through two channels: one is MediaTek as a design service partner, and the other is involvement from Broadcom. Both companies design and manufacture TPU chips for Google, requiring substantial CoWoS capacity.
Morgan Stanley believes that if the supply of ABF substrates improves, MediaTek's procurement volume of TPUs for Google has significant upside potential, and current forecasts might be conservative. Google's ambitions in AI chips have not yet been fully unleashed.
The CoWoS Capacity Gap Is Unbridgeable
Now, back to the most critical question: capacity.
Global CoWoS demand is 1.394 million units in 2026, projected to jump to 2.694 million units in 2027, a 93% increase. TSMC plans to expand its CoWoS capacity to 200,000 units per month by the end of 2027. Non-TSMC capacity is also expected to expand to 80,000 units per month. Combined, global capacity will be about 280,000 units per month, equivalent to an annual capacity of 3.36 million units.
This seems sufficient on the surface, but the problem lies in that the 2.694 million units is the estimated global demand, and Morgan Stanley's survey may not have fully captured all demand signals. Furthermore, the distribution between high-end CoWoS-L and CoWoS-S is crucial. The most advanced CoWoS-L, which Nvidia requires, is extremely tight, and this happens to be TSMC's strength.
Although total capacity appears adequate, TSMC remains in a state of supply shortage at the highest end of advanced packaging. This gives TSMC pricing power and explains Morgan Stanley's Overweight rating on the company.
Emerging Demand Catalysts Persist
Morgan Stanley listed three near-term catalysts. First, improvements in ABF substrate supply, particularly the release of T-Glass capacity procured by MediaTek, will directly boost Google TPU shipments. Second, validation of emerging CPU demand; Nvidia's Vera and AMD's Venice are beginning volume shipments, continuously driving CoWoS consumption. Third, the mass production of Nvidia's next-generation Rubin Ultra product, expected to see significant shipments in the second half of the year.
These catalysts linked together mean that TSMC's CoWoS business will not lack orders in 2027; the key is whether capacity can keep up. From this perspective, TSMC's capital expenditure cycle is far from over.
New Winners in the Supply Chain
In the report, Morgan Stanley specifically highlighted several companies to watch. MediaTek was listed as a top pick because it is Google's primary design partner for TPUs, directly benefiting from AI demand growth. ASE Group and KYEC were also reiterated with Overweight ratings, serving AMD's Venice CPU supply chain and Nvidia's GPU supply chain, respectively.
TSMC itself remains the core beneficiary, but Morgan Stanley's view is that the entire AI supply chain is benefiting, not just the chip design end.
TSMC's AI revenue growth is indeed astonishing; doubling to $86.3 billion by 2027 is not a fantasy. However, this growth is premised on the capacity actually being built, and, most crucially, that advanced packaging capacity does not become a new bottleneck. Morgan Stanley believes it will not, but also clearly points out that supply chain differentiation is intensifying, and the line between winners and losers is being redrawn.
Disclaimer
This article is TideResearch's collation and interpretation of a third-party brokerage research report. The ratings, target prices, earnings forecasts, and related judgments cited herein are the views of Morgan Stanley analysts, representing only the position of their institution, not TideResearch's views, and do not constitute any investment advice.
Please note three points while reading: First, target prices are analysts' expectations for the next approximately 12 months, representing forecasts, not promises, and are subject to frequent adjustments based on performance and market conditions. Second, sell-side research reports are inherently bullish, and some covered companies may have investment banking relationships with the brokerage. Third, the value of a research report lies in its core logic and underlying assumptions, not just a specific target price. Focus on the logic, not just the price.
The market carries risks; decisions should be made independently. This article should not be used as a 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
