Chip equipment leader ASML has raised its 2026 sales forecast after exceeding first-quarter targets, driven by surging AI demand. Taiwan Semiconductor Manufacturing Co. reported a 35% revenue jump in the same period, underscoring the sector's strength despite broader worries over returns from massive AI investments. These results counter fears that heavy spending on AI infrastructure, including hundreds of billions for data centers by firms like OpenAI, may not deliver quick profits.
ASML Signals Stronger Growth Path
ASML, the Dutch giant that supplies critical lithography machines for advanced chips, beat its own guidance with first-quarter sales above the projected €8.2 billion to €8.9 billion range. Profits followed suit, boosting confidence in sustained expansion. The company now expects 2026 net sales of €36 billion to €40 billion, up from its prior €34 billion to €39 billion estimate. This adjustment reflects customers' aggressive capacity builds for AI, secured through long-term contracts that extend into 2026 and later.
TSMC Powers Through on AI Strength
Taiwan Semiconductor, the top contract manufacturer and a major ASML client, posted record first-quarter revenues on April 10, 2026, with a 35% year-over-year increase. AI chip orders offset weaknesses in smartphones and PCs, where memory shortages bit into demand. Analyst Sravan Kundojjala from SemiAnalysis predicts TSMC will surpass its 30% annual growth goal, highlighting how AI workloads dominate the chip pipeline.
Persistent Supply Crunch Fuels Expansion
AI's rapid adoption keeps chip demand ahead of supply, pushing makers to scale production. Hyperscalers and AI developers commit to multi-year deals, ensuring equipment orders flow steadily. Yet this boom collides with skepticism: AI companies pour funds into data centers at a pace that outstrips current revenue gains. Investors question if the chip rally holds as capex rises without matching income.
ETFs Positioned for AI-Led Gains
Chip-focused exchange-traded funds stand to benefit from this momentum. The VanEck Semiconductor ETF (SMH), iShares Semiconductor ETF (SOXX), and State Street SPDR S&P Semiconductor ETF (XSD) track key players in the sector. As AI drives orders, these funds offer broad exposure to firms like ASML and TSMC, though payoff risks linger for the wider AI ecosystem.
