Spending on chip fabrication equipment is witnessing a remarkable surge, bolstering stock prices within this sector and creating a notable exception in an otherwise tumultuous market year. As of now, 2026 is shaping up to be a difficult year for investors, with the S&P 500 index showing minimal movement and many other sectors experiencing declines. However, the S&P 500 Semiconductor Equipment & Materials index stands out, showcasing impressive gains across its member stocks.
In stark contrast to the stagnation seen in other areas, every stock in this specific group has risen by double digits, with four out of five stocks seeing increases greater than 25% since the start of the year. Here’s a snapshot of the performance of these key players:
- Applied Materials (AMAT): up 26.6%
- Lam Research (LRCX): up 33.4%
- KLA (KLAC): up 25.1%
- Teradyne (TER): up 19.8%
- Qnity Electronics (Q): up 25.8%
The stocks in this group are primarily tied to companies that produce sophisticated fabrication and testing equipment for the semiconductor industry. Unlike high-profile chipmakers such as Nvidia and AMD that develop AI chips, these firms provide the fundamental tools necessary for chip production, positioning them as essential players in the ongoing AI and technology revolution.
Notably, many of the largest semiconductor manufacturers are clients of Applied Materials. This extensive client base includes industry giants such as Nvidia, Intel, Samsung, Taiwan Semiconductor Manufacturing (TSMC), Broadcom, ASML Holding, Micron Technology, and Texas Instruments.
According to analysts, the semiconductor market is poised for explosive growth, with a valuation projected to reach between $630 billion and $680 billion by 2024. This figure is expected to escalate further to approximately $1.1 trillion by 2030, largely driven by advancements in AI and the expansion of data centers. A recent McKinsey report suggests these projections could be conservative, estimating the industry’s true value might be between $1.5 trillion and $1.8 trillion by the end of the decade.
In tandem with these market expectations, semiconductor manufacturers are substantially increasing their capital expenditures on equipment. TSMC recently announced plans to invest between $52 billion and $56 billion on equipment and other capital expenses for 2026, a significant jump from the $41 billion spent in 2025. This announcement not only surpassed analyst expectations but also indicated a growing demand for advanced semiconductor manufacturing machinery.
The impact of TSMC’s announcement was immediate, providing substantial boosts to the share prices of four of the five companies in the S&P 500 semiconductor equipment sector. Following the news, Applied Materials saw an 8% price increase, while Lam Research climbed 7%, KLA rose by 6%, and Teradyne increased by 3%. This trend is mirrored by other leading companies, with Nvidia also ramping up its capital expenditures from $3.2 billion in the previous year to projections of $6.2 billion this year and reaching around $7.6 billion by 2027.
The ongoing increase in capital spending among chipmakers bodes well for companies supplying the necessary equipment and materials. With the prevailing belief in the sustained growth of AI technology, entities like Applied Materials and their peers are positioned for significant opportunities ahead.
As investor interest continues to focus on these developments, many analysts agree that now could be an opportune time to consider investments in semiconductor fabrication and testing equipment stocks.
