The AI supercycle is far from exhausted, and semiconductor companies like industry titan TSMC (TSM) are among the catalysts to watch.
“This earnings report, really more than anything, supports the idea that [the AI boom] will continue to move forward,” Victoria Fernandez, chief market strategist at Crossmark Global Investments, told Yahoo Finance’s Opening Offer.
According to Fernandez, the big “rotation” from Big Tech can finally “start to slow down a little.” While market skeptics spent the last quarter betting on a broad exit from the “Magnificent Seven”, a new wave of earnings from the semiconductor sector indicates “there are more legs” for the AI race.
Other key players to watch include ASML ( ASML ), Applied Materials ( AMAT ), and Lam Research ( LRCX ), as Fernandez points to the firms’ respective “strong returns.”
That renewed optimism is largely due to a fundamental shift in the way the market views the picks and shovels of the AI era. For months, investors have feared that demand for AI may be a bubble about to burst. However, the latest data from these four companies — which build hardware for Big Tech — tell a different story of increased capital spending, expanding margins, and relentless sales growth.
Leading that charge is TSMC, the world’s most critical chip foundry, which dominates advanced chip production for giants like Nvidia (NVDA), Apple (AAPL), and Advanced Micro Devices (AMD).
TSMC kicked off the new year by delivering big Q4 earnings today. For the period, revenue came in at $33.73 billion, up 25% year over year, beating consensus estimates of $32.8 billion, according to Bloomberg data. Earnings per share reached $ 3.15, an increase of 8% year on year, and exceeded the expected $ 2.90. TSMC stock is up more than 70% in the past year.
The company announced that it had earmarked up to $56 billion in capital spending for 2026. This aggressive spending plan acts as a massive “buy” signal for the entire supply chain, according to Fernandez, suggesting that the world’s largest technology players are doubling down on infrastructure, rather than pulling back.
The cycle of higher spending for longer has given new life to the other three major suppliers. Take ASML, the only supplier of the lithography machines needed to make advanced AI chips. Its market cap rose after the $500 billion mark on the back of TSMC’s news. ASML shares are up more than 80% in the last 12 months.
Support for these suppliers was visible in pre-market trading, where shares of Applied Materials and Lam Research rose 8% and 6%, respectively. These companies represent the infrastructure layer that must be built before any software-based AI gains can be realized.