Semiconductor equipment stocks surge 5-13% as sector rally broadens

Aehr Test Systems jumped more than 13%, while Applied Materials and Amkor Technology each rose over 7% and ASML gained more than 5%, as the semiconductor equipment sector extended a rally fueled by the US-Iran peace deal and sustained AI infrastructure spending.

"Customers are accelerating their capacity expansion plans for 2026 and beyond because demand for chips is outpacing supply," Christophe Fouquet, chief executive officer of ASML, said in the company's most recent earnings call. ASML's net bookings hit $15.28 billion in the fourth quarter of 2025, with extreme ultraviolet lithography tools alone accounting for $8.60 billion.

The Philadelphia Semiconductor Index, known as the SOX, crossed 14,000 for the first time on June 15 after the US and Iran reached a peace deal ending their nearly four-month conflict. The index has surged 75% year-to-date as big tech companies race to build AI data centers. ASML became the first European company to cross $700 billion in market capitalization, while Applied Materials and Lam Research both hit all-time highs in Monday's session. Ten of the 30 stocks in the SOX index reached record highs that day, including chipmakers Advanced Micro Devices and Micron Technology alongside equipment makers KLA, Entegris, Nova, and Teradyne.

The equipment sector's strength signals that chipmakers are placing orders for next-generation production tools, a leading indicator of semiconductor output 12 to 18 months out. With ASML's backlog at $45 billion and management raising its 2026 revenue guidance to between €36 billion and €40 billion, the capital expenditure cycle appears to have room to run.

AI Capex Is Structurally Tight

The rally in equipment stocks reflects a structural shift in semiconductor demand rather than a cyclical upswing. AI data center buildouts require advanced chips manufactured on leading-edge nodes, which in turn require the most expensive lithography and deposition tools. ASML's high-NA EUV machines, priced at more than $350 million each, are essential for producing chips at the 2nm node and below — a process that packs more transistors per square millimeter, improving performance per watt.

BofA Securities reiterated its buy rating on ASML with a $2,268 price target, citing a potential path to €73 billion in sales and more than €90 in earnings per share by 2030. JP Morgan upgraded its out-year estimates after concluding ASML can ship more than 110 low-NA EUV tools annually, well above the prior ceiling of 90 units.

The primary risk to the equipment sector remains export controls. ASML management explicitly built a wide bandwidth into its 2026 guidance to accommodate potential outcomes of ongoing discussions around restrictions, and China revenue is expected to decline significantly this year. Morningstar moved to a sell rating on ASML in late May, citing overvaluation at a trailing price-to-earnings ratio of 62 times.

For investors, the equipment rally creates a clear divergence: companies with direct exposure to leading-edge AI chip production — ASML, Applied Materials, Lam Research — are benefiting from structural demand that extends beyond any single geopolitical event. The peace deal removed a risk premium that had weighed on the entire sector, but the fundamental driver remains the multiyear AI infrastructure cycle. ASML shares, up 75% year-to-date, trade at 51 times forward earnings, a premium that the company's $45 billion backlog and monopoly position in EUV lithography may justify as long as AI capex continues to grow.

This article is for informational purposes only and does not constitute investment advice.