TSMC (NYSE:TSM) reported record third-quarter revenue of NT$1.49 trillion ($46.71 billion) Thursday, up 50% year over year and above analysts’ NT$1.46 trillion forecast.
But Steve Williams, a semiconductor industry veteran who spent more than 25 years at Applied Materials with TSMC as a major focus, says the concern may not be overbuilding.
"More likely they’re not building enough," Williams told Benzinga.
Why $64 Billion May Not Be Enough
Williams said TSMC’s tightest constraint is advanced packaging, the step that joins processors and high-bandwidth memory into finished AI accelerators.
TSMC raised its capex plan to $60 billion to $64 billion in July. TSMC said about 70% to 80% goes toward advanced process technology, while 10% to 20% funds advanced packaging, testing, mask-making and other areas.
Williams said the split can be misleading because wafer production costs far more than packaging.
TSMC is spending enough to ease the packaging constraint, he said, but not enough to eliminate it in the near term.
Williams said TSMC’s leading-edge wafer capacity is sold out for 2026 and that industry participants expect the same in 2027. He said Nvidia (NASDAQ:NVDA) is increasingly taking over from Apple as the leading TSMC customer, while AMD is seeking more capacity than it can currently secure.
"TSMC is really selling slots in the queue," Williams said.
Why Williams Sees Underbuild, Not Overbuild
Williams said TSMC has historically tried to avoid overspending, including moving equipment from older production nodes into newer fabs.
Expansion takes time too. Williams said chipmaking tools can cost up to $100 million and take about six months from order to shipment and revenue, with suppliers already stretching to keep up.
The risk is that today’s demand may not last long enough to justify the buildout. "Big Short" investor Steve Eisman recently cut risk, citing the AI industry’s dependence on OpenAI and Anthropic and warning that trouble at either company could ripple through the wider trade.
Polymarket traders remain relatively sanguine, putting a 6% chance on an "AI bubble burst" by Dec. 31, in a contract with about $2.4 million in volume.
Williams said even a slowdown may take years to reach TSMC because demand is already locked in.
"There’s so much demand right now that if AI slowed … it would just be reallocated," he said.
Williams said the key question when TSMC reports full earnings on Oct. 15 will be its 2027 capex plans and whether packaging capacity can begin catching up with demand.
TSM shares were down 1.7% at $464 at last check Thursday.
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