Semiconductor Surge Continues: Which Chip Stocks Could Lead 2026's Rally?

The $1 Trillion Milestone Approaches Faster Than Expected

The semiconductor industry is experiencing unprecedented momentum, with 2025 marking a watershed year for growth. Global semiconductor sales reached approximately $772 billion this year, representing a 22.5% increase. Industry projections indicate this explosive growth will sustain into 2026, with revenues forecasted to surge another 26.3% to $975.4 billion — meaning the sector will breach the $1 trillion milestone years ahead of previous estimates.

This acceleration reflects the seismic shift in global technology demand, particularly driven by artificial intelligence proliferation across data centers, consumer devices, and industrial applications. The PHLX Semiconductor Sector index surged 42% in 2025, signaling investor confidence in the sector’s trajectory.

TSMC: The Foundry Powerhouse Capitalizing on Advanced Node Demand

Taiwan Semiconductor Manufacturing (TSMC) stands as the world’s dominant chip foundry, commanding 72% market share as of the last quarter. This commanding position reflects the company’s technological lead and strategic importance to every major chip designer.

TSMC’s 2025 performance has been stellar, with revenue projected to jump 30% and earnings expected to climb nearly 48% to $10.41 per share. The real catalyst for 2026, however, lies in the company’s advanced 2-nanometer production capacity. TSMC has already sold out its entire 2nm production capacity for next year, with production slated to double in 2026. Notably, the company plans to price 2nm chips at a 10-20% premium over its current flagship 3nm node.

This sets up a compelling scenario where TSMC’s earnings growth could significantly outpace the 20% forecast analysts currently model for 2026. Combined with the stock’s valuation at 30 times earnings — a discount relative to the Nasdaq-100’s 32x multiple — the potential for re-rating appears substantial if growth materializes faster than consensus expectations.

ASML: Benefiting from Equipment Cycle Acceleration

Dutch semiconductor equipment manufacturer ASML delivered a 50% return in 2025, yet the real opportunity may lie ahead. The company manufactures the cutting-edge equipment essential for producing advanced chips at facilities like TSMC’s.

With semiconductor equipment demand poised to accelerate driven by AI investments and the confirmed need for additional 2nm manufacturing capacity, ASML faces a powerful tailwind. The company’s earnings are projected to grow 28% in 2025, but 2026 could prove even more expansive. Analysts currently model only 5% earnings growth for 2026, suggesting significant upside risk if equipment orders accelerate beyond expectations.

The semiconductor equipment cycle typically follows manufacturing buildouts with a lag, positioning ASML advantageously for the expanding capacity investments planned across the industry.

AI Spending: The Primary Growth Engine for 2026

Artificial intelligence infrastructure represents the dominant theme driving semiconductor demand. Bloomberg Intelligence estimates that spending on AI servers will surge 45% in 2026 to reach $312 billion. These systems require vast quantities of advanced chips, particularly GPUs and specialized accelerators.

Nvidia, as the leading provider of AI computing chips, holds a $275 billion backlog for data center applications. The company’s growth potential received an additional boost from recent geopolitical developments allowing expanded sales of advanced chips into certain restricted markets. This development has prompted analyst teams to meaningfully increase 2026 earnings expectations.

Current consensus models Nvidia achieving $7.49 per share in 2026 earnings. Using a market-rate earnings multiple of 32x — consistent with the Nasdaq-100 valuation — this implies a potential stock price of $240, representing roughly 33% upside from current levels. Importantly, given recent developments expanding addressable markets, the actual earnings delivery could exceed current forecasts, positioning the stock for potentially greater gains.

The Broader Semiconductor Landscape

Beyond these marquee names, the semiconductor sector’s structural tailwinds extend across the entire supply chain. Design houses like AMD, Qualcomm, and Broadcom benefit from AI and computing demand. Companies manufacturing chips for mobile, consumer, and industrial applications face expanding addressable markets.

The acceleration from $772 billion to projected $975 billion in annual revenue between 2025 and 2026 represents foundational demand shift rather than cyclical bounce. This provides a supportive backdrop for semiconductor equities broadly, though those positioned closest to AI infrastructure buildouts appear especially well-positioned.

The industry’s evolution toward advanced nodes, the concentration of leading-edge capacity at premier foundries, and the equipment investments required to support this growth create a multi-year narrative extending well beyond 2026. For investors tracking semiconductor stocks with exposure to these secular trends, the coming year could prove particularly rewarding.