4 semiconductor stocks giving the AI boom 'more legs'
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] is going to continue to move forward," Victoria Fernandez, chief market strategist at Crossmark Global Investments, told Yahoo Finance's Opening Bid.
According to Fernandez, the great "rotation" out of Big Tech might finally "start to slow down a little bit." While market skeptics spent the past quarter betting on a broad exit from the "Magnificent Seven," a new wave of earnings from the semiconductor sector signals "there are more legs" to 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 earnings."
That renewed optimism is largely due to a fundamental shift in how the market views the picks and shovels of the AI era. For months, investors feared that AI demand might be a bubble nearing its burst. However, the latest data from these four companies — which build the hardware for Big Tech — tells a different story of rising capital expenditures, 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 blockbuster Q4 earnings today. For the period, revenue came in at $33.73 billion, a 25% year-over-year increase, beating consensus estimates of $32.8 billion, according to Bloomberg data. Earnings per share reached $3.15, up 8% year over year, surpassing the expected $2.90. TSMC stock has risen over 70% in the past year.
The company announced it had earmarked up to $56 billion in capital expenditures for 2026. This aggressive spending plan acts as a massive "buy" signal for the entire supply chain, per Fernandez, suggesting that the world's biggest tech players are doubling down on infrastructure, rather than pulling back.
The higher-for-longer spending cycle has revitalized the three other key suppliers. Take ASML, the sole provider of the lithography machines required to make advanced AI chips. Its market cap surged past the $500 billion mark on the back of TSMC's news. Shares of ASML are up over 80% in the past 12 months.
The support for these suppliers was visible in premarket trading, where Applied Materials and Lam Research shares were up 8% and 6%, respectively. These companies represent the infrastructure layer that must be built before any software-based AI gains can be realized.
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