Five Semiconductor Stocks to Own as Hyperscalers Deploy $700 Billion
Hyperscalers are set to spend nearly $700 billion on AI data centers this year, sending the semiconductor ETF up 100% and forcing investors to differentiate between structural AI winners and overhyped laggards.
The Invesco PHLX Semiconductor ETF has doubled year-to-date in 2026, propelled by nearly $700 billion in combined capital expenditures from Microsoft, Google and Meta. The vast majority of that spending is earmarked for AI data centers. However, with valuations stretched, investors must distinguish between companies with structural advantages and those riding cyclical hype.
NVIDIA remains the sector’s anchor, posting fiscal 2026 revenue of $215.9 billion, a 65% year-over-year increase. The company estimates it can sell $1 trillion worth of data center AI chips across 2026 and 2027. It is also targeting a separate $200 billion AI CPU inference opportunity.
Feeding that demand is Taiwan Semiconductor Manufacturing, which controls 72% of the global foundry market. TSMC has raised its full-year revenue growth guidance beyond 30%. This growth is supported by pricing power and emerging demand from agentic AI.
Further down the supply chain, memory and custom silicon are seeing explosive shifts. Micron Technology reported a 196% year-over-year revenue surge in its fiscal second quarter to roughly $24 billion. Morgan Stanley analysts have called the resulting DRAM shortage the most severe in three decades.
Micron has already sold out its 2026 high-bandwidth memory supply under long-term agreements. Meanwhile, Broadcom holds 70% to 80% of the custom AI accelerator market. Its quarterly AI chip revenue reached $10.8 billion, complementing recurring software revenue from VMware.
Upstream equipment makers are also capturing value. Lam Research, which supplies deposition and etch tools, is tracking toward $23.2 billion in fiscal 2026 revenue. The company expects 31% growth in 2027, supported by a $140 billion wafer fabrication equipment spending forecast.
Intel stands as the lone outlier warranting caution. Market enthusiasm for the stock has outpaced its operational execution. Near-term profitability remains elusive despite a surging share price, and its competitive position is more contested than its valuation implies.
