Chip Stocks Have Soared by 157% Over the Past Year. Here Are 2 Top Stocks to Buy Before the Semiconductor Industry Soars Past $1.5 Trillion in 2027

Semiconductor demand driven by AI is forecast to grow 64% in 2026 to $1.32T and surpass $1.55T in 2027, supporting the view of continued upside for key suppliers. TSMC’s revenue rose 30% YoY in the first five months of 2026 and its foundry share increased to 73% from 68% (Q1), while ASML lifted 2026 revenue guidance to €36B–€40B (from €34B–€39B) and expects low-NA EUV shipments to rise 25% to 60 units in 2026 and 33% to 80 in 2027. The article frames both stocks (TSMC +111% YoY; ASML +148% YoY) as still having room for further gains given strong AI orders and ongoing EUV capacity constraints.

Analysis

The cleanest read is not “AI is good for semis,” which is already consensus; it is that the bottleneck has shifted upstream into capacity-intensity and tool scarcity. That favors ASML and TSMC because they monetize every incremental node migration, while the chip designers capture more of the headline TAM but less of the scarce-margin leverage. In the next 3-6 months, any AI order print that implies additional leading-edge wafers should disproportionately lift ASML sentiment before it shows up in revenue, since tool lead times make backlog the real valuation driver.

The second-order losers are the more cycle-sensitive, less capacity-constrained parts of the chain: mature-node foundries, commodity memory, and any fabless name whose growth depends on system-level demand rather than process-node access. If advanced-node capacity remains tight, TSMC can keep taking share, but that also embeds execution risk: a single yield hiccup, Taiwan geopolitics, or customer capex pause would hit the stock harder than the operating model suggests because expectations are already elevated. For ASML, the key risk is not demand destruction but order digestion if customers over-order into 2026-2027 and then slow bookings.

Contrarian take: the market may be underpricing how durable this capex cycle is for ASML, but overpricing how linear TSMC’s share gains can remain. The next inflection is whether customer mix broadens beyond NVIDIA/AMD-led AI and into Apple/QCOM/SONY edge demand; if that happens, the cycle becomes structurally less fragile. Falsifiers are simple: a sequential slowdown in TSMC revenue growth, ASML order intake missing guidance, or any export-control event that changes the supply curve rather than just the narrative.

Key Decisions for Investors

• Long ASML on 3-5% pullbacks; 6-12 month thesis is backlog conversion and EUV shipment leverage. Risk/reward is attractive if bookings continue to outrun shipments; thesis fails if order intake or 2027 commentary implies digestion.
• Long TSM as the highest-quality way to own leading-edge scarcity; use a 3-6 month horizon into earnings/guidance updates. Falsify if sequential revenue growth decelerates materially or gross margin guidance stops expanding.
• Pair trade: long ASML / short a broad semiconductor basket if you expect the capex cycle to matter more than end-demand enthusiasm. This expresses the view that equipment monetizes scarcity better than high-multiple AI application names.
• Avoid chasing NVDA, AMD, and AVGO here unless the goal is beta to AI demand; the better risk-adjusted upside is in the toll collectors, not the demand beneficiaries. Reassess only if hyperscaler capex guidance re-accelerates.
• Set a watch item on any Taiwan-related geopolitical premium widening in TSM; if the stock outperforms on a calm tape and then stalls on good numbers, that is usually the market signaling valuation saturation rather than operating weakness.