Taiwan Surface Mount Tech: AI mix to rise from current <5% to >30% by 2027

J.P. Morgan maintains an Overweight rating on Taiwan Surface Mount Technology (TSMT, 6278.TW), expecting earnings to break out over the next few years driven by fast-rising AI angles: 1) optical transceiver SMT, rising from a low-single-digit revenue mix in 2026e to 20%+ in 2027e, and 2) AI server SMT, from ~1% in 2026e to 5%+ in 2027e, lifting total AI mix from <5% to >30% by 2027. 3Q revenue grew 9% QoQ, slightly above JPMe on strong DRAM and Apple-related revenue. 4Q revenue is expected to grow another 8-10% QoQ (vs 0-3% consensus) on strong optical ramp, with GM exiting the year above 15%. The company is adding US and China transceiver customers and expanding capacity in Taoyuan, Taiwan and Hefei, China; 2026e capex was revised from US$160mn to US$170mn. JPM forecasts 10%+/25%+ revenue growth for 2026/27e with 2027e OP 64% above street consensus, and 2027e EPS of NT$25.58 (67% above consensus). New Jun-27 price target of NT$370, based on 14x 2027e EPS.