ASML Shares Rise Over 7% on TSMC's Optimistic 2026 Outlook

ASML Holding NV shares surged over 7% in recent trading sessions, pushing the company's market value beyond $500 billion. This move followed an upbeat 2026 capital expenditure outlook from TSMC, a key client and bellwether for the semiconductor industry.

The Dutch semiconductor equipment maker's stock had already gained 25% year-to-date before this recent jump. This rally reflects broader optimism in the sector, fueled by TSMC's capital expenditure plans and the anticipated growth in AI-related chip demand. TSMC's guidance indicated a stronger-than-anticipated spending plan of $52 billion to $56 billion for 2026, up at least 25% from its 2025 budget.

ASML's growth is closely tied to demand for its EUV lithography tools, which are essential for manufacturing chips at advanced nodes like 2nm and beyond. TSMC's plans for expanded leading-edge foundry capacity reinforce the long-term need for ASML's cutting-edge equipment.

Why Did This Happen?

TSMC's December 2025 revenue of NT$335.0 billion ($10.6 billion) exceeded expectations, showcasing the foundry's strong position in the AI and high-performance computing markets. This performance is a direct result of its partnerships with major clients like Nvidia and Apple, which continue to drive demand for advanced chips according to reports.

ASML also benefited from a positive shift in market sentiment around AI infrastructure spending. The company's EUV lithography systems are central to next-generation chip manufacturing, and TSMC's capex plans confirm the necessity of ASML's technology in meeting future demand.

How Did Markets React?

The stock market's reaction underscored the sector's resilience. ASML's shares climbed to a new all-time high, while TSMC's stock also saw gains in the days following its revenue announcement according to market analysis. Analysts attributed this response to the perceived sustainability of the AI boom, reinforced by TSMC's commitment to increasing its capacity for advanced node production.

The broader semiconductor manufacturing equipment market is also seeing strong momentum. Market research firm Astute Analytica projected that the sector will grow to $224.44 billion by 2033, with 2025 expected to hit $125.5 billion in total sales. This growth is being driven by both foundries and memory manufacturers expanding their AI-related investments.

What Are Analysts Watching Next?

Investors are now turning their focus to upcoming earnings reports from both ASML and TSMC. ASML's Q4 results, due in late January, will offer insight into its order intake and future revenue expectations. The company has already signaled that 2026 sales are unlikely to fall below 2025 levels.

TSMC's full-year 2025 earnings report, also scheduled for late January, will provide further clarity on its capital expenditure plans and overall AI-driven demand. Any upward revision in its spending guidance could reinforce the bullish outlook for ASML and other equipment manufacturers according to analyst reports.

Analysts are also monitoring geopolitical developments, particularly U.S. export controls and their potential impact on ASML's business. The U.S. government recently announced new import restrictions on advanced semiconductors and manufacturing equipment, which could affect ASML's order flow in 2026.

Despite these risks, the consensus among analysts remains cautiously optimistic. JPMorgan and Bernstein have upgraded ASML to "Buy," citing its monopoly on EUV lithography and its central role in the AI supply chain. However, some analysts warned that delays in the rollout of High-NA EUV systems could hurt near-term expectations.

The semiconductor manufacturing equipment market remains on track for robust growth. TSMC's global fab expansion plans, including significant investments in the U.S. and Japan, will require continued demand for ASML's tools according to government action. These projects, supported by government incentives like the U.S. CHIPS Act, are expected to drive long-term industry spending.