Now, Taiwan Semiconductor Manufacturing, or TSM as one might breezily refer to it, being the largest foundry in the world – a veritable titan amongst chip-fabricators – naturally causes a bit of a stir when they announce their results. Wall Street, you see, keeps a most vigilant eye on these things, as TSM’s fortunes are rather a reliable barometer of the semiconductor industry’s health. A bit like checking the pulse of the modern age, what?
Semiconductors, you understand, are the new oil, or so the chaps in the know are saying. They’re the building blocks of absolutely everything digital – powering factories, data centers, automobiles, those infernal smartphones, computers, and all sorts of other contraptions. And with everyone going absolutely gaga for artificial intelligence, demand for TSM’s services has been, shall we say, rather brisk. A jolly good show, all around.
Thus, it wasn’t terribly surprising to find TSM’s latest quarterly report exceeding expectations. Indeed, their guidance for 2026 appears remarkably solid, despite a few production hiccups. This, naturally, is excellent news for another key player in this drama – ASML, the Dutch chaps who make the machines that make the chips. A most agreeable synergy, wouldn’t you say?
TSMC’s Spending Spree: A Boon for ASML
TSM’s management, on their recent earnings call, rather casually mentioned plans to “increase capacity and step up capital expenditure” to satisfy their customers’ future needs. Not a shock, really, considering their factories are running at a pace that would make a greyhound blush. They’ve actually sold out their latest process node before it even hit full production! A situation that suggests, rather strongly, that supply is struggling to keep pace.
Consequently, TSM anticipates a capital expenditure of between $52 and $56 billion in 2026 – a potential 33% increase over last year’s $40.9 billion. A substantial sum, to be sure, but one that speaks volumes about their confidence. And, rather excitingly, they foresee revenue from AI data center chips growing at a compound annual rate of 50-55% through 2029. This explains why they’re planning to dedicate a whopping 70-80% of that 2026 capex to advanced process technologies. A rather hefty investment in the future, wouldn’t you agree?
It’s little wonder, then, that ASML’s shares jumped a cheerful 6% following TSM’s report on January 15th. You see, ASML is, to all intents and purposes, the only firm making the machines that allow foundries like TSM to create these advanced chips, employing those delightfully small process nodes. A near-monopoly, you might say, and a rather profitable one at that.
ASML’s dominance stems from their mastery of EUV (extreme ultraviolet) lithography. These machines enable the creation of chips with features measured in nanometers – 7nm or smaller, in fact. Smaller features mean more transistors packed into the same space, leading to faster computing and lower power consumption. A dash of engineering brilliance, if I may say so.
The ever-increasing power demands of AI data centers, coupled with their colossal computing requirements, are driving TSM to push the boundaries of 2nm and 3nm node manufacturing. And to do that, they’ll be relying heavily on ASML’s machines. Which is precisely why the Dutch firm is poised for a rather splendid period of growth in 2026.
ASML: A Promising Outlook
ASML’s stock has already enjoyed a most impressive 85% surge in the last six months. TSM’s recent results have acted as a bit of a rocket booster, and it appears their upcoming earnings report later this month will provide another significant lift.
Back in July, ASML was rather hesitant about 2026 being a growth year. But three months later, they cautiously confirmed that revenue would increase. Analysts, however, are predicting a modest 7% earnings increase in 2026, down from the 15% expected this year. A rather pessimistic view, wouldn’t you say?
But with clients like TSM ramping up their capital expenditure, ASML is perfectly positioned to exceed those expectations. There’s a strong possibility of a better-than-expected performance and guidance when they release their results, which could send the stock price soaring for the remainder of the year. A most agreeable prospect, indeed.
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2026-01-22 13:53