TSMC (2330.TW): Faster capacity ramp, flattish GMs; stay OW

J.P. Morgan expects TSMC to expand leading-edge capacity at an accelerated pace into 2028 given the widening demand-supply gap in leading-edge wafers and strong AI demand. With four additional N3 fabs (two in Taiwan, one in the US, one in Japan) in 2027-28, a steep N2 ramp and an earlier A14 pull-in, capex is forecast to rise to US$90bn/109bn in 2027/28, adding 117K/175K wfpm of new capacity, or 2-3x the typical annual buildout; USD revenues are expected to grow 40%/28% in 2027/28. Faster US fab expansion, potential Texas expansion and collaboration with SpaceX/TeraFab should ease competitive concerns, but the rapid ramp of new nodes and overseas fabs will raise depreciation and costs, keeping gross margins range-bound at 66-67% over the next several quarters; 2027 price hikes of ~10% for leading-edge and 3-5% for mature nodes only partly offset cost inflation. Maintain Overweight with a Jun-27 PT of NT$3,300, based on ~20x 12-month forward P/E.