TSMC Allocates 60% of Advanced Chip Packaging to Nvidia Through 2026, Cementing AI Compute Lead

In the rapidly evolving landscape of artificial intelligence (AI) computing, Taiwan Semiconductor Manufacturing Company (TSMC) stands as a pivotal player, particularly through its advanced chip packaging capabilities. As demand for high-performance AI chips surges, TSMC’s allocation of limited packaging capacity through 2026 appears heavily skewed towards Nvidia, which commands an estimated 60% share. This dominance positions Nvidia as a de facto gatekeeper in AI compute infrastructure, influencing the strategies of rivals such as Broadcom, AMD, Amazon, and Marvell, who secure progressively smaller portions at 15%, 10%, 5%, and 5% respectively. Such prioritisation underscores the bottlenecks in semiconductor supply chains and highlights the strategic imperatives for AI-driven growth.

The Surge in Advanced Packaging Demand

Advanced chip packaging technologies, including TSMC’s CoWoS (Chip on Wafer on Substrate) and SoIC (System on Integrated Chips), have become critical for integrating complex AI accelerators. These methods enable denser, more efficient chip designs essential for handling the computational intensity of AI workloads. According to industry analyses, the global semiconductor advanced packaging market is projected to expand significantly, with estimates from Technavio indicating growth of USD 993.4 billion from 2024 to 2028 at a compound annual growth rate (CAGR) of over 37%. This boom is fuelled by escalating investments in fabrication facilities and the relentless push for lower technology nodes, though high initial costs remain a barrier.

TSMC, as the world’s leading contract chipmaker, is ramping up its efforts to meet this demand. Recent reports suggest the company plans to boost its monthly CoWoS output from around 70,000 wafers to 100,000 by the end of 2026, driven by surging needs from AI and high-performance computing (HPC) sectors. This expansion aligns with broader industry trends, where Moore’s Law is slowing, prompting a shift towards innovative packaging to sustain performance gains. For instance, TSMC’s research highlights how advancements in computing hardware have been instrumental in the AI renaissance since the 2010s, enabling practical applications that require vast training data and sophisticated algorithms.

Nvidia’s Dominant Position

Nvidia’s outsized allocation of TSMC’s packaging capacity reflects its commanding role in AI hardware. With products like the Blackwell platform driving demand for AI servers, Nvidia benefits from priority access, potentially accelerating its market lead. Analyst sentiment, as captured by a Strong Buy rating of 1.4 on a scale where 1 is the strongest, underscores confidence in Nvidia’s trajectory. Forward-looking models from UBS anticipate robust growth in cloud AI capital expenditures, projected to rise 62% in 2025, which could further entrench Nvidia’s position.

This prioritisation has tangible market implications. Nvidia’s shares, trading at $180.45 with a 10.37% increase over the 50-day average, reflect investor optimism amid AI enthusiasm. The company’s market capitalisation stands at $4.4 trillion, dwarfing many peers, and its forward P/E ratio of 43.80 suggests expectations of sustained earnings growth, with EPS forecasted at 4.12 for the forward period.

Implications for Competitors

Broadcom, securing a 15% slice, leverages its strengths in custom silicon for data centres and networking. Its involvement in AI ecosystems, including partnerships for high-bandwidth memory (HBM) solutions, positions it well, though secondary to Nvidia. Broadcom’s stock, at $306.34, shows a 10.24% gain over the 50-day average, with a Strong Buy rating of 1.3 and forward EPS estimates at 6.17, indicating resilience despite packaging constraints.

AMD, with 10%, is poised for growth through its MI series accelerators, such as the MI355 and MI400. Morgan Stanley projections, as noted in industry discussions, expect AMD’s advanced packaging demand at TSMC to double in 2026, outpacing Nvidia’s growth rate in relative terms. This could stem from massive anticipated demand for AMD’s offerings. The company’s shares trade at $177.51, up 18.30% from the 50-day average, with a Buy rating of 1.7 and forward EPS at 5.10.

Amazon and Marvell, each at 5%, represent emerging forces in custom AI chips. Amazon’s Trainium and Inferentia chips aim to optimise its cloud services, while Marvell focuses on data centre interconnects. Amazon’s stock, at $231.03, has risen 4.47% over the 50-day average, boasting a Strong Buy rating of 1.3. Marvell, trading at $76.19 with a 3.00% 50-day gain and a Buy rating of 1.5, faces challenges from its negative trailing EPS but holds promise with forward estimates at 2.50.

Market Bottlenecks and Strategic Shifts

The uneven allocation raises questions about supply chain vulnerabilities. Posts on platforms like X indicate sentiment around fully booked capacities for 2024 and 2025, prompting TSMC to accelerate expansions. For example, TSMC’s planned $2.87 billion investment in a Taiwanese packaging plant, reported in 2023, aims to capitalise on AI momentum. Yet, as a PR Newswire release from SEMICON Taiwan 2025 notes, scaling challenges persist amid Moore’s Law deceleration.

Analyst-led forecasts suggest TSMC’s revenue could hit record highs in 2025, with July 2025 figures already marking a 25.8% year-on-year increase to NT$323.166 billion, per Digitimes. This growth is tied to 3nm process dominance for AI chips. However, reorganisation efforts, including merging facilities and delaying low-return projects, signal a focus on high-margin AI priorities.

Broader Industry Outlook

The prioritisation of Nvidia in TSMC’s ecosystem could amplify competitive dynamics. Rivals may seek alternative packaging providers or invest in in-house capabilities, potentially fragmenting the market. Taiwanese firms are driving custom HBM growth, as per ChosunBiz, amid AI demands. A SWOT analysis from Investing.com highlights how AI propels TSMC’s stock growth despite challenges like geopolitical risks.

Investors should monitor earnings dates: TSMC’s on 17 July 2025, Nvidia’s on 27 August 2025, and others accordingly. With TSMC’s shares at $238.88, up 4.00% from the 50-day average and a Strong Buy rating of 1.4, the company’s role as an AI enabler remains robust. Forward EPS stands at 8.08, with a P/E of 29.56, pointing to valued growth prospects.

In essence, TSMC’s packaging allocations through 2026 illuminate the power structures in AI compute. Nvidia’s lead may solidify its gatekeeper status, but it also invites innovation from underdogs, shaping the semiconductor landscape for years ahead. Dry humour aside, if packaging were a dinner reservation, Nvidia has the chef’s table—leaving others to vie for scraps.

References

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• Digitimes. (2025). TSMC packaging capacity expansion. https://www.digitimes.com/news/a20250811PD201/tsmc-capacity-packaging-taiwan-expansion.html
• Investing.com. (2025). Taiwan Semiconductor SWOT analysis. https://investing.com/news/swot-analysis/taiwan-semiconductor-manufacturing-companys-swot-analysis-ai-drives-stock-growth-amid-market-challenges-93CH-4154577
• PR Newswire. (2025). SEMICON Taiwan 2025 packaging outlook. https://www.prnewswire.com/apac/news-releases/advanced-packaging-on-the-rise-semicon-taiwan-2025-leads-the-way-302530864.html
• Technavio. (2024). Global market report on semiconductor advanced packaging. https://finance.yahoo.com/news/semiconductor-chip-packaging-market-grow-231000604.html
• TSMC Research. (n.d.). Artificial intelligence hardware advances and impact. https://research.tsmc.com/english/research/artificial-intelligence/publish-time-1.html
• USITC. (2023). US exposure to Taiwanese semiconductors. https://www.usitc.gov/publications/332/working_papers/us_exposure_to_the_taiwanese_semiconductor_industry_11-21-2023_508.pdf
• CNN. (2025). US-China race in CoWoS packaging. https://www.cnn.com/2025/06/07/tech/us-china-advanced-packaging-technology-cowos-ai-hnk-intl
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• X.com posts referencing real-time sentiment and allocation (@Beth_Kindig, @JesseCohenInv, @danielromero, @dnystedt, @StockSavvyShay, et al.)