B. Riley has framed upcoming second-quarter earnings from ASML and Taiwan Semiconductor Manufacturing Co. (TSMC) as potentially "tone-setting" for the broader semiconductor industry and the semiconductor capital equipment market. The firm says the acceleration of AI-related infrastructure spending has outpaced its prior outlook, and that change amplifies the signaling value of results and guidance from the two companies.
At the heart of B. Riley's view is an upward revision to anticipated hyper-scale AI capital expenditure. The firm reports that CY26 guidance from major hyper-scalers has increased to roughly $695 billion to $725 billion - a level B. Riley had previously associated with CY27. Adding Oracle's approximately $90 billion commitment and investments from neo-cloud players CoreWeave (estimated $31 billion to $35 billion) and NBIS (estimated $20 billion to $25 billion) lifts B. Riley's CY26 AI capex total to about $880 billion, with CY27 potentially exceeding $1.02 trillion.
Those spending assumptions carry direct implications for TSMC's forthcoming guidance. B. Riley contends that if TSMC were to reclassify general-purpose CPUs into its high-performance computing AI accelerator taxonomy, the company could guide CY26 headline sales up by approximately 500 basis points to growth near +35% year-over-year. The reclassification discussion is tied to increasing CPU orchestration demands driven by agentic AI, which the firm notes is expanding the addressable market for x86 and ARM server processors.
Citi analysts, in a preview cited by B. Riley, articulated a similar line of thinking: "We think there is a higher likelihood for TSMC to further lift its revenue growth target for 2026 and long-term revenue CAGR given sustained leading-edge demand and improving visibility in the longer term." B. Riley also highlights industry estimates that reflect meaningful upside in server CPU demand - AMD's estimate of a $120 billion x86 and ARM server TAM by 2030 at a 35% CAGR is referenced, as is NVIDIA's Vera CPU, which B. Riley says has about $20 billion of CY26 revenue visibility.
On the semiconductor capital equipment front, B. Riley believes industry wafer fab equipment (WFE) spending for CY26 has clearly moved above the $140 billion-plus levels recently cited by equipment suppliers such as KLA and Lam Research. The firm also suggests CY27 WFE could approach $170 billion-plus. Within that context, TSMC's own capital expenditures are expected by B. Riley to exceed the Street consensus of $55.6 billion for CY26, and to rise by another 15% or more in CY27 on top of an already elevated baseline.
Memory spending is identified as a later but potentially meaningful driver for equipment demand. B. Riley notes that much of CY26 memory capex is concentrated on facilities construction, and that the mix of tool spending is not projected to accelerate materially until CY27, consistent with recent guidance from Micron. The firm concludes that peak memory tool demand "may still be a few years away," implying a longer runway for equipment suppliers than some current consensus views may assume.
The lead-up to the ASML and TSMC reports is occurring against a backdrop of a sharp, macro-driven market sell-off. B. Riley characterizes the pullback as a tactical buying opportunity rather than evidence of a structural reversal: while "risks persist as noted in 7/13's 'Taiwan Monthly Sales….'" the firm writes that a continued strong demand trajectory should lift consensus EPS for calendar 2026-2028 and provide upward catalyst potential for shares that have been weak recently.
For investors seeking concrete ways to express exposure to the theme, B. Riley highlights a set of preferred names across equipment and on-cycle semiconductors. In the semi-cap equipment space the firm rates Ichor Holdings as Buy with a $125 price target, FormFactor as Buy with a $165 target, and Onto Innovation as Buy with a $365 target. On the on-cycle semiconductor side, B. Riley emphasizes Silicon Motion with a $312 price target, arguing its enterprise product cycles and shifting revenue mix are only beginning to materialize.
Summary
B. Riley says ASML and TSMC's upcoming earnings will likely be read as directional signals for the semiconductor and equipment markets after the firm moved up its timetable for a large surge in AI-related infrastructure spending. The revised view projects about $880 billion in CY26 AI capex once large commitments from Oracle, CoreWeave, and NBIS are included, with potential for CY27 to surpass $1.02 trillion. That backdrop supports higher WFE forecasts, elevated TSMC capex expectations, and an elongated timeline before peak memory tool demand.
Key Points
- B. Riley now estimates roughly $880 billion in CY26 AI infrastructure spending after adding major commitments from Oracle, CoreWeave, and NBIS; CY27 could exceed $1.02 trillion.
- TSMC could materially raise CY26 revenue guidance - potentially by about 500 basis points to +35% year-over-year - if it reclassifies CPUs into an HPC AI accelerator category, reflecting stronger server CPU demand.
- Industry wafer fab equipment spending for CY26 is seen above $140 billion, with CY27 possibly near $170 billion; TSMC capex is expected above the Street consensus of $55.6 billion for CY26, then rising 15%+ in CY27.
Risks and Uncertainties
- Macro-driven market volatility - recent sharp sell-offs complicate near-term price action and could obscure fundamentals in the earnings window.
- Timing of memory tool spending - much CY26 memory capex is focused on facilities, with tool spending not expected to accelerate materially until CY27, delaying upside for toolmakers.
- Execution and classification choices - TSMC's potential reclassification of CPUs into an AI accelerator taxonomy would change reported headline growth rates but depends on corporate accounting and segmentation decisions.
Tags: semiconductors, AI, capex, TSMC, ASML