Broadcom Flags AI Chip Supply Crunch Amid TSMC Capacity Limitations

Broadcom has flagged a significant supply crunch for AI chips, warning that TSMC's manufacturing capacity has become a bottleneck choking the semiconductor supply chain in 2026. The company reported Q1 2026 AI revenue of $8.4 billion, a 106% year-over-year increase, while guiding Q2 AI revenue to $10.7 billion. AVGO shares rose 5% following the March 4 earnings release, with the stock trading near $322.

The supply constraints stem from TSMC's inability to scale advanced node capacity fast enough to meet surging AI chip demand, which is running approximately 3x above available supply. PCB lead times for optical transceivers have stretched from six weeks to six months, and major customers are locking in 3-to-5-year supply agreements to secure capacity. TSMC plans $52-56 billion in capital expenditure for 2026 to expand 3nm production, but the expansion timeline is not keeping pace with current demand.

Despite the near-term headwinds, CEO Hock Tan expressed confidence in the long-term trajectory, noting that Broadcom has secured the supply chain needed to achieve AI chip revenue exceeding $100 billion by 2027. The company's total AI backlog stands at $73 billion to be delivered over the next 18 months. Analysts remain bullish, with an average 12-month price target of $472 across 47 buy ratings and zero sell recommendations.