AMD to Double TSMC Packaging Need by 2026, Surpassing NVIDIA Growth

The semiconductor sector is witnessing a profound transformation driven by escalating demand for advanced packaging technologies, particularly in the realm of artificial intelligence accelerators. As companies like Advanced Micro Devices (AMD) and NVIDIA vie for dominance in high-performance computing, projections indicate that AMD could experience outsized growth in its requirements from Taiwan Semiconductor Manufacturing Company (TSMC) by 2026, fuelled by its Instinct MI355 and forthcoming MI400 series. This trajectory underscores broader industry trends where AI-driven workloads are reshaping supply chains and capacity allocations at leading foundries.

Advanced Packaging: A Critical Enabler for AI Innovation

Advanced packaging techniques, such as Chip on Wafer on Substrate (CoWoS) and System on Integrated Chips (SoIC), have become indispensable for integrating high-bandwidth memory (HBM) with processing units to meet the computational demands of AI models. TSMC, the world’s largest contract chipmaker, reported a 61% year-on-year increase in net profit for the second quarter of 2025 (April to June), reaching approximately USD 8.8 billion, largely attributed to surging orders for AI-related chips. This performance reflects a revenue growth of 40% to USD 20.8 billion in the same period, highlighting the foundry’s pivotal role in the ecosystem.

Comparing this to prior periods, TSMC’s first quarter of 2025 (January to March) saw revenues of USD 18.9 billion, a 16% rise from the previous year, but the second quarter’s acceleration points to intensifying demand. Historical data from 2024 shows TSMC’s full-year revenue at USD 75.5 billion, with AI contributing over 40% of its high-performance computing segment. By 2025, analysts anticipate this segment to expand further, with advanced nodes like 3nm and 5nm accounting for more than half of wafer revenues.

AMD’s Ascending Trajectory in AI Accelerators

AMD has positioned itself as a formidable challenger to NVIDIA in the AI GPU market through its Instinct lineup. The company’s MI300 series, launched in late 2023, achieved sales of USD 2 billion in 2024, but expectations for 2025 have been tempered, with revised estimates projecting around USD 4.5 billion in data centre GPU revenue. This adjustment follows initial forecasts of USD 10 billion, scaled back due to supply constraints and competitive dynamics.

Looking ahead, AMD’s roadmap includes the MI350 series, set for release in late 2025, utilising TSMC’s 4nm process and HBM3e memory. More significantly, the MI355X variant and the MI400 series, slated for 2026, promise substantial enhancements, including up to 423GB of HBM4 memory per GPU and bandwidth exceeding 300GB/s. These advancements are expected to narrow the performance gap with NVIDIA’s offerings, potentially driving a surge in orders.

Industry reports suggest that AMD’s demand for TSMC’s advanced packaging capacity could more than double in 2026 compared to 2025 levels, outstripping NVIDIA’s projected growth rate in the same period. For context, NVIDIA’s Blackwell architecture, including the GB200, is anticipated to maintain strong momentum, but capacity bottlenecks at TSMC may constrain its expansion. Recent commentary on platforms like X, such as from HyperTechInvest, echoes this sentiment of optimism around AMD’s pipeline.

Comparative Analysis: AMD versus NVIDIA

To quantify these trends, consider the following benchmarks derived from analyst estimates and company disclosures. NVIDIA reported data centre revenue of USD 22.6 billion in its fiscal first quarter of 2026 (February to April 2025), a 427% increase year-on-year, propelled by Hopper and Ampere GPUs. AMD, in contrast, posted USD 2.3 billion in data centre revenue for its second quarter of 2025 (April to June), up 115% from the prior year, though starting from a lower base.

A forward-looking comparison reveals shifting dynamics:

These figures are based on consensus analyst forecasts as of 29 July 2025, with AMD’s upside linked to its competitive pricing—MI355X units are expected to retail at USD 25,000, comparable to NVIDIA’s H100 but with enhanced memory configurations. NVIDIA’s growth, while robust, may face headwinds from TSMC’s capacity expansions, which are prioritising a mix of clients including Apple and Broadcom.

TSMC’s Capacity Expansion and Supply Chain Implications

TSMC is aggressively scaling its advanced packaging facilities to address these demands. The company plans to increase CoWoS capacity to 45,000-50,000 wafers per month by the end of 2025, up from 20,000 in 2024. A new facility in the United States, targeted for operation by 2029, aims to reduce geopolitical risks and foster a more independent supply chain. This expansion is critical, as NVIDIA has reportedly secured half of TSMC’s CoWoS allocation for 2025, leaving AMD, Microsoft, and Amazon to compete for the remainder.

Broadly, the semiconductor industry’s outlook for 2025 projects global chip sales exceeding USD 600 billion, led by generative AI and data centre investments. Deloitte’s analysis indicates that while PC and mobile markets remain subdued, AI-related demand could drive a 15-20% compound annual growth rate through 2026.

Risks and Forward Projections

Despite the bullish indicators, risks persist. Currency fluctuations, such as the strengthening New Taiwan Dollar, have prompted TSMC to raise prices by 3-5% for advanced processes in 2025. Geopolitical tensions in the Taiwan Strait could disrupt supplies, though TSMC’s diversification efforts mitigate this somewhat. For AMD, execution on its roadmap is paramount; any delays in MI400 deployment could erode its competitive edge.

AI-based forecasts, derived from historical patterns of GPU adoption cycles (e.g., NVIDIA’s 300% revenue growth from 2023 to 2024), suggest AMD could capture 15-20% of the AI accelerator market by 2027, implying revenues of USD 20-25 billion annually. These projections assume sustained AI investment and TSMC’s ability to meet capacity needs.

In summary, the interplay between advanced packaging demand and AI innovation positions AMD for accelerated growth, potentially reshaping market shares in the semiconductor landscape by 2026.

References

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