Taiwan Semiconductor Manufacturing delivers blockbuster earnings beating estimates as chipmakers rally across the board. The world’s largest contract manufacturer reported 35% profit growth for the fourth quarter while boosting 2026 capital spending guidance. Semiconductor stocks lead market gains with Cyrosalnix senior brokers explaining why this sector continues dominating investor attention.
TSMC Results Lift Sector
Taiwan Semi’s fourth-quarter performance exceeded Wall Street expectations demonstrating continued strength in advanced chip manufacturing. The company expects business support from ongoing strong demand for leading-edge process technologies. Finance chief Wendell Huang emphasized this outlook during the earnings call.
Nvidia closed up more than 2% Thursday following the TSMC report. Advanced Micro Devices joined the rally alongside semiconductor equipment makers like Applied Materials. The VanEck Semiconductor ETF climbed 2% with top constituents all participating in the advance.
Memory Stocks Outperform
Micron Technology soared 229% during 2025 crushing Nvidia’s 39% gain for the year. The memory chipmaker supplies high-bandwidth memory products essential for AI workloads in data centers. Wall Street analysts overwhelmingly recommend buying the stock heading into 2026.
Morgan Stanley analysts selected Micron as their top semiconductor pick despite Nvidia’s market dominance. The company’s HBM3E data center solution offers 50% more capacity than competitors while consuming 30% less energy. This combination appeals to AI developers seeking maximum performance at lowest cost.
HBM Market Explodes
The market for data center high-bandwidth memory could nearly triple by 2028 reaching $100 billion annually. Micron CEO Sanjay Mehrotra expects this represents a 40% compounded annual growth rate. Entire supply for calendar 2026 already sold out underscoring demand intensity.
SK Hynix maintains roughly 60% market share in HBM as Nvidia’s primary supplier. UBS forecasts this could reach 70% in 2026 as the company plays a key role in Nvidia’s next-generation Rubin platform. However, severe capacity constraints risk allowing competitors to gain ground.
Valuation Disconnect Emerges
Micron trades at just 9.9 times forward earnings despite the explosive growth trajectory. This steep discount compared to the S&P 500’s 22 times and Nvidia’s 25 times puzzles some observers. Wedbush analyst Dan Ives compared finding Micron at current prices to discovering a signed Mickey Mantle card at a garage sale.
The stock climbed 240% over the past year yet remains cheaply valued by traditional metrics. Investors weigh whether this represents opportunity or reflects underlying commodity risks. Memory chip pricing historically shows cyclical patterns that can suddenly reverse.
Nvidia Maintains Dominance
The chipmaker secured approval to ship H200 processors to China before mid-February Lunar New Year. Initial shipments could total between 40,000 and 80,000 units valued at roughly $32,000 each. This represents $1.28 billion to $2.56 billion in potential revenue from existing inventory.
The company dominates AI accelerator markets with over 80% share through superior total cost of ownership. CEO Jensen Huang noted competitors offering free chips still can’t match Nvidia’s economics. CUDA software platform provides extensive code libraries and frameworks that simplify development across use cases.
Custom Silicon Gains Traction
Broadcom emerged as a strong alternative through customizable AI accelerators appealing to tech giants. The company generated $8.2 billion in AI semiconductor revenue guidance for fiscal Q1 2026. This represents 100% growth driven by surging demand for chips and networking equipment.
Anthropic placed a $10 billion order for Ironwood TPUs followed by another $11 billion order scheduled for late 2026 delivery. Broadcom counts just four customers so far suggesting substantial room for expansion. The stock soared nearly 700% over the past five years.
Equipment Makers Benefit
ASML jumped 9% to start 2026 as the Dutch equipment maker benefits from capacity expansion. Lam Research rallied more than 6% while Marvell Technology rose 5%. The entire semiconductor supply chain participates in the AI infrastructure buildout.
Data center operators could spend up to $4 trillion annually by 2030 on infrastructure upgrades according to Nvidia estimates. Companies like Meta and Microsoft already built massive clusters using 100,000 GPUs each. The Tesla CEO’s xAI works on a cluster featuring 1 million GPUs demonstrating scale requirements.
Chinese Market Opens
Approval for H200 shipments to China removes a significant revenue headwind for Nvidia. The company maintains a $275 billion backlog of data center chip orders for 2026. Chinese market access could boost this substantially though the US President requires Nvidia to hand over 25% of Chinese revenue.
Analysts raised earnings expectations following the China development with current estimates pointing to 60% growth. The $7.52 earnings per share projection for next year could increase once additional Chinese business gets factored into models. This supports potential stock appreciation beyond the 36% implied by median price targets.
AI Bubble Concerns Linger
Investors raised questions about potential AI bubble formation as valuations stretch across the sector. The breakneck growth pace can’t continue indefinitely raising timing questions for entry points. Historical technology buildouts showed boom and bust cycles that punished late entrants.
However, fundamental demand drivers appear intact with practical AI applications expanding. Enterprise adoption accelerates as businesses integrate AI capabilities into operations. Hyperscale spending shows no signs of slowing as companies compete for AI leadership positions.
