Today's surge in shares for semiconductor equipment companies Applied Materials, Lam Research, and KLA Corp. can be attributed to...
Today's surge in shares for semiconductor equipment companies Applied Materials, Lam Research, and KLA Corp. can be attributed to...
Semiconductor equipment titans like Applied Materials (AMAT), Lam Research (LRCX), and KLA Corporation (KLAC) saw a significant surge on Thursday, with gains of 4.5%, 4%, and 4.3%, respectively. These stocks are major players in the semiconductor equipment oligopoly, boasting impressive long-term returns despite a rocky near-term period.
This rally was likely sparked by Taiwan Semiconductor Manufacturing Company's (TSMC) Q4 earnings release, which revealed plans for higher-than-expected capital expenditures for the following year. TSMC, the dominant force in semiconductor manufacturing, anticipates a massive five-year growth cycle, with a predicted revenue CAGR of almost 20% from 2025 to 2029. AI accelerators are expected to drive this growth, with TSMC estimating a mid-40% annual CAGR for this segment.
TSMC's capital expenditures are expected to reaccelerate in the coming year, reaching between $38 and $42 billion. This represents a significant 33% increase compared to 2024 and surpasses the prior annual peak of $36.3 billion, set in 2022. This substantial investment in new semiconductor equipment will likely benefit Applied, Lam, and KLA, which provide essential etch and deposition equipment, metrology and process control solutions, and other manufacturing solutions for TSMC.
Semiconductor capital equipment stocks, despite their occasional volatility, are solid long-term investments for the patient investor. Their correlation to the dynamic semiconductor industry, which is expected to outperform GDP for the foreseeable future, and their strong profitability make them worthy additions to any portfolio. Although they can be sensitive to market swings, the industry's continuous innovation and growth offer ample opportunities for long-term gains.
Sources:
- TSMC's strong Q4 earnings report and 2025 capex projections fuel optimism - Yahoo Finance
- KLA Corp. reports record Q1 earnings as demand for AI chips boosts revenue - Reuters
- Global Semiconductor Equipment Market to Surpass $100B in 2025 - Market Watch
- The US CHIPS Act: Boost for the U.S. Semiconductor Industry - NASDAQ
- Semiconductor Industry Outlook 2025: Growth Drivers and Challenges - GlobalData
Investors looking to diversify their finance portfolio might consider investing in semiconductor capital equipment stocks, as they offer promising long-term returns, despite occasional volatility. With the semiconductor industry expected to outperform GDP for the foreseeable future and the strong profitability of these stocks, they can be valuable additions to any portfolio. Moreover, the substantial investment TSMC is making in new semiconductor equipment will likely benefit companies like Applied Materials, Lam Research, and KLA, which provide essential equipment and solutions for TSMC.