TSMC's capital spending is likely to reach US$83 billion in 2027 and US$92 billion in 2028, Morgan Stanley estimates, factoring in the chip maker's 2-nanometer and 1.4-nanometer chip capacity expansion. TSMC has a capex target of US$60 billion to US$64 billion this year.

TSMC management said in the 3Q post-earnings call that it plans to more than double its 2-nanometer capacity build by 2027. TSMC's 3Q gross margin at 66.4% missed MS's expectation of 67.5%.

The company's 4Q margin guidance midpoint of 66% shows continued pressure due to the 2-nanometer ramp-up and expanding overseas operation, MS says. MS maintains its target price of 3,088 New Taiwan dollars on TSMC. The stock is down 0.4% at NT$2,430.