TSMC’s ‘Leave No Food On The Table’ Pledge Signals More AI Chip Investment, Morningstar Says

• Morningstar estimated that matching the full scale of Tesla’s proposed Terafab project could triple TSMC’s effective manufacturing capacity.
• The firm estimated TSMC’s capital expenditure could reach $98 billion in 2028, up 53% from its 2026 estimate.
• It also noted that TSMC’s fourth-quarter revenue guidance came in about $7 billion above its previous forecast, reflecting a faster ramp-up in 2-nanometer production and advanced packaging.

Taiwan Semiconductor Manufacturing (TSM) shares edged lower in early morning trade on Friday, on track to post their biggest weekly loss since July, but Morningstar believes the stock is currently trading 27% below its fair value. 

Analyst Phelix Lee said TSMC’s outlook reflects persistent demand for advanced semiconductors and the company’s scope to expand production. He noted that TSMC’s pledge to “leave no food on the table” signals that it could increase investment to capture more of that demand.

TSM stock fell 0.6% in pre-market trade, with retail sentiment on Stocktwits around the firm dropping to ‘bullish’ from ‘extremely bullish’ over the past day. Chatter, however, continued to rise to ‘extremely high’ from ‘high’ levels. Platform data showed an over 200% jump in message volumes over the past week.

Morningstar’s fair value estimate of $534 for TSM implies a roughly 26.5% upside from Thursday’s close. 

TSM Stock Is ‘Undervalued’

Morningstar said it viewed TSMC as “undervalued,” with sustained AI demand and investment in advanced manufacturing supporting its long-term outlook. The firm said its $534 fair value estimate reflects its view that TSMC can benefit from demand growth while expanding the capacity needed to serve customers.

Meanwhile, Barclays analyst Simon Coles raised the price target on TSMC stock to $670 from $665, which implies an even higher potential upside of almost 60%. In a note to investors cited by TheFly, the analyst kept an ‘Overweight’ rating on the shares and raised its fiscal 2026 revenue guidance, citing increasing demand and having strong visibility on customer roadmaps.

Tesla’s Terafab Plans Could Expand TSMC’s Capacity

Morningstar said TSMC confirmed discussions with Tesla (TSLA) about the electric-vehicle maker’s proposed Terafab chipmaking project. Any arrangement would require TSMC to operate the fabrication facilities, the analyst noted. TSMC is also evaluating a potential expansion in Texas, although no agreement has been reached.

Morningstar said it had not incorporated the proposed Texas project into its forecasts. However, it estimates that matching the full scale of Tesla’s proposed Terafab could triple TSMC’s effective manufacturing capacity.

The report noted that further U.S. expansion could also help TSMC shorten shipping times and strengthen collaboration with Texas’ semiconductor industry. It estimated that the potential project would add to the $265 billion the company has already committed to investing in the U.S.

The firm said it has not included the potential Texas project in its forecasts. However, it estimated that matching the full scale of Tesla’s proposed Terafab could triple TSMC’s effective capacity.

TSMC Capital Expenditure Could Reach $98B

TSMC kept its 2026 capital expenditure outlook unchanged following its third-quarter results but signaled that spending could accelerate beyond this year, according to Lee. 

Morningstar estimated that capital expenditure could reach $98 billion in 2028, up 53% from its 2026 estimate, as the company expands production of its 2-nanometer and 1.4-nanometer chips.

The firm pointed to Lasertec and Tokyo Electron as potential beneficiaries as TSMC invests in additional manufacturing capacity.

Morningstar said further U.S. expansion could benefit TSMC through faster shipping and closer collaboration with Texas’ semiconductor industry. The plans would add to the $265 billion the company has already committed to U.S. investment.

AI Demand Supports Morningstar’s Long-Term Outlook

Morningstar said TSMC’s fourth-quarter revenue guidance was about $7 billion above its previous forecast, reflecting a faster ramp-up in 2-nanometer production and advanced-packaging capacity.

Lee adjusted the firm’s 2026 forecasts to account for the updated guidance but left longer-term estimates unchanged while awaiting clearer signs that supply-chain constraints are easing.

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