Bank of America (BAC) believes Taiwan Semiconductor Manufacturing (TSM) could emerge as one of the clearest winners of the next AI wave, as demand for advanced AI chips and packaging technology continues to rise. In a new report today, BofA raised its outlook for CoWoS capacity growth through 2027 and called TSMC its ‘preferred stock’ in the space. The bank believes the company is well positioned to benefit as AI companies race to secure more chip manufacturing and advanced packaging capacity.
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AMZO: built for a short position on AMZNCoWoS, short for Chip-on-Wafer-on-Substrate, is a technology used to connect multiple chips together inside powerful AI systems. It plays a key role in AI servers built for companies like Nvidia (NVDA), Advanced Micro Devices (AMD), and large cloud providers.
BofA said demand for the technology remains extremely strong across AI GPUs, CPUs, and custom AI chips. The bank added that about 70% of current CoWoS demand comes from merchant GPUs and CPUs, while the rest comes from ASICs and custom chips built by hyperscalers.
Why BofA Is Bullish on TSMC
BofA now expects CoWoS industry capacity to grow 68% in 2027, higher than its earlier forecast of 57%. The bank believes TSMC is especially well positioned because many AI companies continue relying on its manufacturing and advanced packaging capabilities to expand AI infrastructure.
The analysts also pointed to growing demand from AMD’s upcoming Venice server CPU and MI400 AI GPU. According to BofA, AMD is benefiting from stronger support from TSMC’s advanced 2nm manufacturing process and additional CoWoS capacity.
At the same time, cloud giants are building more of their own AI chips. BofA raised its forecast for Alphabet’s Google (GOOGL) TPU demand through 2027, while also seeing upside potential for Amazon’s (AMZN) Trainium chips. Broadcom (AVGO), which helps supply Google’s AI chips, could also benefit from the trend.
BofA added that demand for CoWoS packaging remains backed by a strong order backlog, with TSMC leading much of the industry’s capacity expansion.
Is TSM Stock a Buy, Sell, or Hold?
TSMC stock has gained 107% over the past year. Despite its prolonged rally, TSM stock maintains a Strong Buy consensus rating on Wall Street, based on five Buy ratings and one Hold rating. Notably, no analyst rates the stock a Sell. Also, TSM’s average price target of $465 implies about 14% upside over the next 12 months.
