diff --git a/src/compiler/checker.ts b/src/compiler/checker.ts
index d45fdf65e59..146fd8a95f5 100644
--- a/src/compiler/checker.ts
+++ b/src/compiler/checker.ts
@@ -13565,6 +13565,9 @@ namespace ts {
                     mapType(types[unionIndex], t => getTemplateLiteralType(texts, replaceElement(types, unionIndex, t))) :
                     errorType;
             }
+            if (contains(types, wildcardType)) {
+                return wildcardType;
+            }
             const newTypes: Type[] = [];
             const newTexts: string[] = [];
             let text = texts[0];
diff --git a/tests/baselines/reference/templateLiteralTypes1.errors.txt b/tests/baselines/reference/templateLiteralTypes1.errors.txt
index 66c5859bc7e..bce55c2b122 100644
--- a/tests/baselines/reference/templateLiteralTypes1.errors.txt
+++ b/tests/baselines/reference/templateLiteralTypes1.errors.txt
@@ -232,4 +232,13 @@ tests/cases/conformance/types/literal/templateLiteralTypes1.ts(205,16): error TS
     type T100000 = [...TDigits, ...TDigits, ...TDigits, ...TDigits, ...TDigits];  // Error
                    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
 !!! error TS2590: Expression produces a union type that is too complex to represent.
+    
+    // Repro from #40863
+    
+    type IsNegative<T extends number> = `${T}` extends `-${string}` ? true : false;
+    
+    type AA<T extends number, Q extends number> =
+        [true, true] extends [IsNegative<T>, IsNegative<Q>] ? 'Every thing is ok!' : ['strange', IsNegative<T>, IsNegative<Q>];
+    
+    type BB = AA<-2, -2>;
     
\ No newline at end of file
diff --git a/tests/baselines/reference/templateLiteralTypes1.js b/tests/baselines/reference/templateLiteralTypes1.js
index 1b28a658d44..8266f6c50f0 100644
--- a/tests/baselines/reference/templateLiteralTypes1.js
+++ b/tests/baselines/reference/templateLiteralTypes1.js
@@ -204,6 +204,15 @@ type D100000 = `${Digits}${Digits}${Digits}${Digits}${Digits}`;  // Error
 type TDigits = [0] | [1] | [2] | [3] | [4] | [5] | [6] | [7] | [8] | [9];
 
 type T100000 = [...TDigits, ...TDigits, ...TDigits, ...TDigits, ...TDigits];  // Error
+
+// Repro from #40863
+
+type IsNegative<T extends number> = `${T}` extends `-${string}` ? true : false;
+
+type AA<T extends number, Q extends number> =
+    [true, true] extends [IsNegative<T>, IsNegative<Q>] ? 'Every thing is ok!' : ['strange', IsNegative<T>, IsNegative<Q>];
+
+type BB = AA<-2, -2>;
 
 
 //// [templateLiteralTypes1.js]
@@ -453,3 +462,9 @@ declare type Digits = 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9;
 declare type D100000 = `${Digits}${Digits}${Digits}${Digits}${Digits}`;
 declare type TDigits = [0] | [1] | [2] | [3] | [4] | [5] | [6] | [7] | [8] | [9];
 declare type T100000 = [...TDigits, ...TDigits, ...TDigits, ...TDigits, ...TDigits];
+declare type IsNegative<T extends number> = `${T}` extends `-${string}` ? true : false;
+declare type AA<T extends number, Q extends number> = [
+    true,
+    true
+] extends [IsNegative<T>, IsNegative<Q>] ? 'Every thing is ok!' : ['strange', IsNegative<T>, IsNegative<Q>];
+declare type BB = AA<-2, -2>;
diff --git a/tests/baselines/reference/templateLiteralTypes1.symbols b/tests/baselines/reference/templateLiteralTypes1.symbols
index 727638c918b..4c7162e1135 100644
--- a/tests/baselines/reference/templateLiteralTypes1.symbols
+++ b/tests/baselines/reference/templateLiteralTypes1.symbols
@@ -843,3 +843,29 @@ type T100000 = [...TDigits, ...TDigits, ...TDigits, ...TDigits, ...TDigits];  //
 >TDigits : Symbol(TDigits, Decl(templateLiteralTypes1.ts, 200, 63))
 >TDigits : Symbol(TDigits, Decl(templateLiteralTypes1.ts, 200, 63))
 
+// Repro from #40863
+
+type IsNegative<T extends number> = `${T}` extends `-${string}` ? true : false;
+>IsNegative : Symbol(IsNegative, Decl(templateLiteralTypes1.ts, 204, 76))
+>T : Symbol(T, Decl(templateLiteralTypes1.ts, 208, 16))
+>T : Symbol(T, Decl(templateLiteralTypes1.ts, 208, 16))
+
+type AA<T extends number, Q extends number> =
+>AA : Symbol(AA, Decl(templateLiteralTypes1.ts, 208, 79))
+>T : Symbol(T, Decl(templateLiteralTypes1.ts, 210, 8))
+>Q : Symbol(Q, Decl(templateLiteralTypes1.ts, 210, 25))
+
+    [true, true] extends [IsNegative<T>, IsNegative<Q>] ? 'Every thing is ok!' : ['strange', IsNegative<T>, IsNegative<Q>];
+>IsNegative : Symbol(IsNegative, Decl(templateLiteralTypes1.ts, 204, 76))
+>T : Symbol(T, Decl(templateLiteralTypes1.ts, 210, 8))
+>IsNegative : Symbol(IsNegative, Decl(templateLiteralTypes1.ts, 204, 76))
+>Q : Symbol(Q, Decl(templateLiteralTypes1.ts, 210, 25))
+>IsNegative : Symbol(IsNegative, Decl(templateLiteralTypes1.ts, 204, 76))
+>T : Symbol(T, Decl(templateLiteralTypes1.ts, 210, 8))
+>IsNegative : Symbol(IsNegative, Decl(templateLiteralTypes1.ts, 204, 76))
+>Q : Symbol(Q, Decl(templateLiteralTypes1.ts, 210, 25))
+
+type BB = AA<-2, -2>;
+>BB : Symbol(BB, Decl(templateLiteralTypes1.ts, 211, 123))
+>AA : Symbol(AA, Decl(templateLiteralTypes1.ts, 208, 79))
+
diff --git a/tests/baselines/reference/templateLiteralTypes1.types b/tests/baselines/reference/templateLiteralTypes1.types
index fe1d45d0c75..687b03eb17b 100644
--- a/tests/baselines/reference/templateLiteralTypes1.types
+++ b/tests/baselines/reference/templateLiteralTypes1.types
@@ -515,3 +515,24 @@ type TDigits = [0] | [1] | [2] | [3] | [4] | [5] | [6] | [7] | [8] | [9];
 type T100000 = [...TDigits, ...TDigits, ...TDigits, ...TDigits, ...TDigits];  // Error
 >T100000 : any
 
+// Repro from #40863
+
+type IsNegative<T extends number> = `${T}` extends `-${string}` ? true : false;
+>IsNegative : IsNegative<T>
+>true : true
+>false : false
+
+type AA<T extends number, Q extends number> =
+>AA : AA<T, Q>
+
+    [true, true] extends [IsNegative<T>, IsNegative<Q>] ? 'Every thing is ok!' : ['strange', IsNegative<T>, IsNegative<Q>];
+>true : true
+>true : true
+
+type BB = AA<-2, -2>;
+>BB : "Every thing is ok!"
+>-2 : -2
+>2 : 2
+>-2 : -2
+>2 : 2
+
diff --git a/tests/cases/conformance/types/literal/templateLiteralTypes1.ts b/tests/cases/conformance/types/literal/templateLiteralTypes1.ts
index 08e467d980c..a708a47b3a1 100644
--- a/tests/cases/conformance/types/literal/templateLiteralTypes1.ts
+++ b/tests/cases/conformance/types/literal/templateLiteralTypes1.ts
@@ -206,3 +206,12 @@ type D100000 = `${Digits}${Digits}${Digits}${Digits}${Digits}`;  // Error
 type TDigits = [0] | [1] | [2] | [3] | [4] | [5] | [6] | [7] | [8] | [9];
 
 type T100000 = [...TDigits, ...TDigits, ...TDigits, ...TDigits, ...TDigits];  // Error
+
+// Repro from #40863
+
+type IsNegative<T extends number> = `${T}` extends `-${string}` ? true : false;
+
+type AA<T extends number, Q extends number> =
+    [true, true] extends [IsNegative<T>, IsNegative<Q>] ? 'Every thing is ok!' : ['strange', IsNegative<T>, IsNegative<Q>];
+
+type BB = AA<-2, -2>;