Woofun AI reports that Bank of America Securities has fundamentally restructured its AI supply chain thesis by reintegrating server CPUs as a primary growth driver, resulting in immediate price target increases for TSMC, ASE, and Kinik. The bank projects the global semiconductor manufacturing market specifically tied to server CPUs will expand from $15 billion in 2025 to $49 billion in 2028, while the outsourcing ratio for CPU manufacturing is forecast to climb from 52% to 71%. This structural pivot signals a decisive departure from an era where Intel's internal capacity dominated production, moving the industry toward a model reliant on external foundries, advanced packaging, testing, and material systems.

The primary catalyst for this valuation shift is the massive overflow of computing power requirements as the AI sector transitions from training phases to inference, a change accelerated by the proliferation of agent-based AI applications. In this new operational landscape, CPUs are no longer limited to traditional supporting roles but are increasingly tasked with managing complex system-level functions including task scheduling, control planes, data preprocessing, network I/O, memory access, and system services. By 2030, the total addressable market for global server CPUs could swell from approximately $35 billion in 2025 to over $170 billion, with AI-specific server CPUs potentially capturing more than 80% of this volume.

Two distinct structural changes underpin this aggressive assessment. First, the functional importance of server CPUs has escalated due to the demands of AI inference and agent-based workloads, forcing these processors to handle a broader spectrum of system-level tasks. Second, the manufacturing process is undergoing a sustained exodus toward outsourcing. As AMD migrates to TSMC's advanced process nodes and custom silicon solutions such as AMD Venice, NVIDIA Vera, Google Axion, AWS Graviton, and Microsoft Cobalt ramp up production, a significant volume of CPU wafers, advanced packaging, and testing orders is flowing directly into the Asian supply chain.

Bank of America estimates that the server CPU front-end foundry total addressable market will grow from $5.8 billion in 2025 to $24.8 billion in 2028, while the back-end packaging and testing market is projected to rise from $1.9 billion to $9.6 billion. TSMC is identified as the most direct beneficiary of this trend, prompting a price target increase from NT$2560 to NT$3060, or from $490 to $590 for its ADRs, while maintaining a Buy rating. This adjustment is supported by rising consumption of server CPUs on 5nm and more advanced process nodes, with demand for server CPU-related wafers expected to surge from around 16,000 pieces per month in 2025 to about 50,000 pieces per month in 2028. By 2028, server CPUs may account for 12% of TSMC's front-end revenue, a significant increase from the 6% recorded in 2025.

Woofun AI data shows that TSMC's utilization rates for 5nm and below nodes are expected to remain above 90%, with the 3nm node serving as the core foundation for high-performance computing. Bank of America estimates TSMC's capital expenditure in 2027 may reach between $75 billion and $80 billion, with investment heavily focused on 3nm, 2nm, and advanced packaging capabilities such as CoWoS and SoIC. It is critical to note that while TSMC's official capital expenditure guidance for 2026 stands at around $52 billion to $56 billion, the 2027 figures represent Bank of America's independent forecasts rather than official company guidance.

The upward trajectory extends significantly into backend packaging and testing sectors. The server CPU backend packaging and testing total addressable market could increase from $1.9 billion in 2025 to $9.6 billion in 2028, with the major OSAT advanced backend business share rising from 11% to 24%. ASE is another direct beneficiary of this expansion, with its price target raised from NT$550 to NT$750 alongside a Buy rating. ASE's market share in these relevant markets is projected to increase from 10% in 2025 to 24% in 2028, while TSMC is expected to retain approximately 63% market share. To meet the surging requirements for GPUs, ASICs, and next-generation server CPUs, CoWoS capacity must expand at a compound annual growth rate of 54% from 2025 to 2028.

Testing processes will also see amplified activity, creating value for companies like KYEC and design service firms such as GUC. The scope of supply chain adjustments includes several other listed entities with revised price targets, specifically Kinik, Chroma, Hon Precision, and GPTC. These adjustments reflect a broad-based recognition of the shifting dynamics within the semiconductor ecosystem.

Three critical checkpoints will determine the validity of these projections. The first is the continuation of AI capital expenditure by major cloud providers and AI service providers. The second involves the mass production speed of in-house CPU initiatives, specifically projects like Google Axion and AWS Graviton. The third variable concerns internal capacity changes at Intel, specifically whether the proportion of outsourced manufacturing continues to increase or if orders begin to return to internal manufacturing facilities. This marks a definitive shift in how the industry values the CPU layer of the AI stack.