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Zacks Investment Ideas feature highlights: Taiwan Semiconductor Manufacturing, ASML and Lam Research

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For Immediate Release

Chicago, IL – January 16, 2026 – Today, Zacks Investment Ideas feature highlights Taiwan Semiconductor Manufacturing (TSM - Free Report) , ASML Holding (ASML - Free Report) and Lam Research (LRCX - Free Report) .

AI Stocks to Gain as TSMC Posts Another Strong Quarter

Taiwan Semiconductor Manufacturing reported fourth-quarter earnings this morning, delivering another strong set of results that reinforced the durability of AI-driven semiconductor demand. Revenue came in at $33.73 billion, representing a 25.5% year-over-year increase. Earnings per share rose 35% from a year ago, while gross margins expanded to an impressive 62.3%.

Management highlighted that the quarter was characterized by exceptionally strong demand for leading edge process technologies, underscoring the continued buildout of advanced AI and high-performance computing infrastructure. Perhaps most notably, TSMC raised its capital expenditure budget, signaling confidence that demand for AI chips will remain elevated well into the future.

As the world's most critical and technologically advanced semiconductor manufacturer, TSMC's investment decisions carry broad implications across the industry. This earnings report serves as another confirmation that the AI cycle is not slowing, but instead deepening, particularly at the most advanced nodes where capacity remains tight.

The readthrough beneficiaries are already clear. Upstream equipment suppliers such as ASML Holding and Lam Research stand to gain directly from increased capital spending. ASML is the world's dominant supplier of advanced lithography systems, while Lam Research holds leading positions in deposition and etch technologies. Both operate near-monopoly businesses within their respective niches, making them key enablers of TSMC's expansion.

LRCX and ASML Shares Climb to Record Highs

Lam Research currently carries a Zacks Rank #2 (Buy), reflecting modest recent revisions to earnings estimates. The stock trades at approximately 43.4x forward earnings, with profits expected to grow at an annualized rate of 18.1% over the next three to five years. Revenue is projected to increase 14.1% this year and 12.5% next year. Following TSMC's earnings release, shares of Lam Research surged more than 6%, reaching new all-time highs.

ASML also reacted strongly, rising more than 6% on the day and pushing to record levels. The company currently holds a Zacks Rank #3 (Hold), reflecting a flat earnings revision trend. ASML trades at roughly 41.7x forward earnings, with long-term earnings growth forecast at 22.2%. Sales are expected to grow 23.7% this year, followed by a more moderate 4% increase next year.

Overall, TSMC's results reinforce a critical takeaway for investors: demand for leading-edge semiconductor capacity remains exceptionally strong, and the companies that supply the tools enabling that expansion continue to be among the clearest beneficiaries of the AI investment cycle.

Taiwan Semiconductor Shares Trade at a Discount to Growth

TSMC's valuation further reinforces the strength of the investment case. Shares currently trade at approximately 25.7x forward earnings, even as earnings per share are projected to grow 33.4% annually over the next three to five years. Revenue growth remains equally compelling, with sales expected to climb 34.5% this year followed by an additional 23.6% increase next year.

Given TSMC's unrivaled position as the world's premier advanced AI semiconductor foundry, and the capital intensity and technological barriers protecting that role, this valuation appears reasonable relative to its growth profile and arguably compelling in the context of the broader AI ecosystem.

Should Investors Buy Shares in TSM, ASML and LRCX?

TSMC's earnings report adds further confirmation that the AI-driven semiconductor cycle remains firmly intact. Capital spending decisions, margin strength, and demand for leading-edge chips all point to a multi-year investment runway rather than a short-lived surge.

For investors, the choice comes down to exposure preference: TSMC offers direct participation in the core of advanced chip manufacturing at a valuation that reflects some geopolitical risk, while ASML and Lam Research provide leveraged, higher multiple exposure to the same buildout through equipment and services. Together, the trio underscores that the AI trade is very clearly persisting as the technology further entrenches into business and daily life.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.

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