TSMC dominates AI foundry market amid CSP CapEx surge, while rivals face growth pressure

Cloud service providers (CSPs) Amazon, Google, Meta, and Microsoft are projected to significantly increase AI-related CapEx to $670 billion by 2026, which NVIDIA CEO Jensen Huang considers "rational and necessary." This is creating a clear divide in the wafer foundry industry. TSMC is expected to see record profits in 2025 (over NT$1.7 trillion with an EPS of NT$66.25) and a 30% increase in USD revenue by 2026, primarily due to its near-monopoly in AI GPU and ASIC customers. TSMC's long-term outlook is optimistic, with plans to double production capacity in the next decade and a significant CapEx increase from $40.9 billion in 2025 to $52-$56 billion in 2026. TSMC is also upgrading its second Kumamoto fab to 3nm. In contrast, Samsung and Intel's foundry businesses are struggling. SMIC, UMC, and VIS face growth pressure, though SMIC saw revenue and profit recovery in Q4 2025, with full-year revenue exceeding $9 billion for the first time, but a lower gross margin of 19.2%. SMIC's 2026 outlook is flat for revenue and gross margin, with CapEx remaining at 2025 levels ($8.1 billion). Powerchip Semiconductor unexpectedly benefited from a memory boom and is poised to exit losses by 2026.