TSMC Hitting Production Capacity Limits, Says Broadcom

Fabless chipmaker Broadcom (AVGO) is dealing with production capacity constraints at Taiwan Semiconductor Manufacturing (TSM), according to a news report. Broadcom stock fell on Tuesday, while TSM stock rose.

Broadcom is seeing supply chain constraints, including capacity limits at its manufacturing partner TSMC, due to the soaring demand for AI chips, Reuters reported.

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“We are seeing that TSMC is hitting (production capacity) limits,” Natarajan Ramachandran, director of product marketing in Broadcom’s Physical Layer Products division, told reporters on Tuesday. “They will be increasing the capacity to 2027, but that has become a bottleneck, ⁠or that has kind of choked the supply chain in 2026.”

On a conference call with analysts Jan. 15, TSMC Chief Executive C.C. Wei said capacity was “very tight” and the company was speeding up capacity expansion in Taiwan and Arizona to meet AI demand.

In morning trades on the stock market today, Broadcom stock fell nearly 2% to 316.16. TSM stock rose a fraction to 339.29.

A Reason To ‘Stay Long’ On TSM Stock

TSMC is the world’s largest contract chipmaker and produces advanced chips for AMD (AMD), Broadcom, Nvidia (NVDA), Tesla (TSLA) and others.

On Saturday, Tesla Chief Executive Elon Musk said difficulty in securing capacity at foundries TSMC and Samsung spurred his decision to build a massive chip factory in the U.S. called the Terafab.

TSMC hitting capacity limits shouldn’t be a surprise to anyone, Mizuho Securities trading-desk analyst Jordan Klein said in a client note.

“To me this is not new news,” Klein said. “It is a reason you own TSM in size and stay long. This is how customers push TSM to spend more capex to expand capacity in out years. They go to the press.”

TSM stock and Broadcom stock are on the IBD Tech Leaders list. Further, Broadcom is on IBD’s Sector Leaders list.

Follow Patrick Seitz on X at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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