AI Boom Hits Supply Wall: Broadcom (AVGO) Warns TSMC (TSM) Capacity Is Fully Stretched

FomoAnxiety · 2026-03-24T12:30:06+00:00

Broadcom warns that chip supply may remain tight until 2026 due to rising AI demand, with TSMC reaching production capacity limits. Other components also face shortages, leading customers to secure long-term supply contracts.

FomoAnxiety

2026-03-24 12:30:06

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Broadcom Inc. AVGO +4.08% ▲ is warning that chip supply may stay tight into 2026, as demand for AI hardware continues to outpace production. The company said capacity at Taiwan Semiconductor Manufacturing Company TSM +2.80% ▲ has become a key constraint across the industry.

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“We are seeing that TSMC is hitting production capacity limits,” said Natarajan Ramachandran, a director at Broadcom. He added that what once seemed like “infinite” capacity has now turned into a bottleneck for the supply chain in 2026.

TSMC, which builds chips for companies like Nvidia Corporation NVDA +1.70% ▲ and Apple AAPL +1.41% ▲ , had already noted earlier this year that its advanced production lines are running at near capacity due to strong AI demand.

Meanwhile, AVGO shares rose 4.08% on Monday, closing at $322.51.

Supply Chain Pressure Extends Beyond Chips

At the same time, the issue is not limited to chip fabrication. Broadcom also pointed to shortages in laser parts and printed circuit boards, which are key components used alongside semiconductors. Suppliers in Taiwan and China are also nearing capacity limits, which is adding to delays.

As a result, customers are shifting their strategy. Many are now signing supply deals lasting three to five years to secure production slots. Samsung Electronics SSNLF +54.05% ▲ also said recently that it is moving toward longer-term contracts with key clients.

Nvidia May Adjust Future Chip Design

Meanwhile, supply limits are already shaping product plans. Reports indicate that Nvidia may need to adjust its next-generation Feynman AI platform, expected in 2028. Due to limited access to TSMC’s most advanced 2-nanometer process, Nvidia may use that node only for key parts, while shifting other components to older technology.

In addition, Apple is said to hold more than 50% of early 2-nanometer capacity, which leaves less room for other large buyers such as Nvidia and Meta Platforms META +1.75% ▲ . Industry estimates suggest that demand for advanced chips is about three times higher than the available supply.

Looking ahead, TSMC is expanding its footprint with new factories in Taiwan and the U.S. However, new capacity is not expected to ease supply pressure in a meaningful way until 2027.

We used TipRanks’ Comparison Tool to align all notable chipmakers mentioned in the piece alongside major chip manufacturers such as Intel INTC +0.32% ▲ , Advanced Micro Devices AMD +0.67% ▲ , and Micron MU -4.39% ▼ .

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