Taiwan Semiconductor Manufacturing's board of directors recently approved a capital budget of up to $45 billion, which exhibits a distinct structural focus, with funds heavily concentrated on advanced front-end manufacturing processes and large-scale wafer fab infrastructure construction. Bank of America analyst Haas Liu maintained a "Buy" rating on the stock with a target price of NT$2,360. The board announced two major decisions on Tuesday: first, approval of a quarterly cash dividend of NT$6.0 per share; second, allocation of $45 billion for wafer fab construction, capacity installation, and technology upgrades, covering the entire technology chain including advanced front-end processes, specialty technologies, mature nodes, and advanced packaging. Additionally, the company simultaneously injected an additional NT$1.2 billion into its Arizona subsidiary. Liu believes this shift in budget structure aligns closely with TSMC's aggressive capital expenditure plan for 2026. Forecasts indicate TSMC's total capital expenditures for 2026 are expected to climb to a range of $52 billion to $56 billion, representing a significant increase of approximately 27% to 37% compared to 2025. This surge is particularly pronounced on a quarterly basis, marking another peak in capital investment since the CoWoS advanced packaging capacity expansion wave in the first half of 2024. The report emphasizes that this "front-end leaning" resource allocation is essentially paving the way for the upcoming mass production of 2-nanometer (N2) and A16 angstrom-level processes, ensuring sufficient cleanroom space and production capacity supply at critical technology transition points. Bank of America analyst Haas Liu wrote in a client note, "Regarding the capital appropriation, we find the allocation bias towards advanced front-end manufacturing and facilities/cleanroom noteworthy. While quarterly approval amounts may appear uneven, the cumulative amount shows significant year-on-year growth, the first instance since the first half of 2024—when TSMC was preparing for massive CoWoS expansion and further 3nm capacity increases following the 2023 industry downturn. This is consistent with TSMC's aggressive 2026 capital expenditure guidance, including additional 3nm capacity, 2nm capacity ramp-up, A16 technology readiness, and advanced packaging capacity expansion and technology roadmap advancement. We will monitor whether this trend persists, incorporating supply chain feedback, as a basis for interpreting its capital expenditure outlook." From a deeper driver perspective, the core impetus behind TSMC's capital expenditure expansion stems from the "insatiable" demand for high-performance chips from the artificial intelligence sector. Management has previously stated publicly on multiple occasions that AI development's demand for advanced processes far exceeds expectations, compelling the company to accelerate the construction of gigafab clusters globally, including key locations like Arizona. By establishing extremely high capital and technology barriers in front-end manufacturing, TSMC aims to widen its lead over competitors like Samsung and Intel and leverage capacity certainty to secure long-term cooperation intentions from key customers such as Nvidia, Apple, and major cloud service providers. Bank of America maintained its "Buy" rating on TSMC, noting that the clear budget structure reflects the company's strategic resolve in navigating semiconductor industry cycles. With the steady advancement of the 2nm technology roadmap, TSMC is converting its technological advantage into absolute market share through this intensive resource investment. This scale of expansion is expected to support its profit growth expectations beyond 2026. Separately, TSMC also reported on Tuesday that its January revenue increased 37% year-over-year to NT$401.3 billion (approximately $12.7 billion), exceeding its full-year revenue growth expectation of 30%. However, this figure may be subject to fluctuation compared to the same period last year due to the Lunar New Year holiday falling in January 2025.