By Tae Kim
Tea Leaves. Hi everyone. Earnings season has begun and a handful of important chip companies have already reported.
There are already two key takeaways investors should know. First, there's improvement in demand. We already knew demand was robust, but companies are now saying it is accelerating even more. Second, the visibility of orders and durability of demand is extending further out.
Late Tuesday, Texas Instruments surprised analysts with a better-than-expected guidance for the March quarter. "We did see orders improving through the quarter," CEO Haviv Ilan said on the earnings conference call, citing continuing recovery in the industrial sector and strength in the data center market.
Texas Instruments sells the basic building-block chips that go into products in nearly every sector of the economy, from autos and industrials to consumer electronics. The better outlook is a sign the upturn is broadening beyond just AI chips to other sectors. It bodes well for other analog chip companies.
The other big report this week was ASML Holding, which has a near monopoly on advanced lithography machines, crucial for manufacturing high-performance semiconductors.
There was a clear inflection point in demand for ASML's products. The Dutch maker of chip-making equipment said Wednesday that orders for the December quarter came to EUR13.2 billion ($15.7 billion), nearly double what analysts had forecast.
"The market outlook has improved notably over the last months," ASML CEO Christophe Fouquet said on the earnings call. "We have seen a notable increase in acceleration of capacity expansion planning across a large majority of our customer base."
The robust commentary suggests chip makers are seeing rising demand and are willing to invest many billions of dollars to add capacity going into next year.
Texas Instruments stock surged 9.9% on Wednesday, while ASML stock fell 2%. I wouldn't read too much into ASML stock's reaction, as it is likely more due to short-term trader positioning. The order numbers and fundamental commentary are extremely positive.
Finally, there is Intel. The chip maker's shares fell last week following a disappointing revenue forecast for the current quarter as demand outstripped supply. On earnings day Thursday, Intel Chief Financial Officer David Zinsner told me processor demand was "really strong," but the company had worked through much of its prior inventory and was still facing "supply constraints." He said supply will improve each quarter for the rest of this year as they build more capacity.
But one Zinsner remark on the earnings call was the most eye opening and shouldn't be overlooked. The executive said he spoke to multiple hyperscaler customers before the call and they implied the strong demand would last "several years."
So how should investors digest the latest information? Commodity chip stocks may go up dramatically but there is high risk they will drop the most on the inevitable news of large capacity expansion. Unless you are a nimble trader with special insight on what is happening in the supply chain, I would avoid those names.
It's best to stick to the highest-quality companies with durable competitive advantages. Look for strong proprietary intellectual property positions and firms with near monopolies or duopolies over their markets and products that are hard to substitute. ASML, TSMC, and Nvidia fit the bill. Add to them on dips.
This Week in Barron's Tech
-- Amazon to Cut 16,000 Jobs. What's Behind Its Largest Ever Corporate Layoffs. -- CoreWeave Stock Rises Again. Wall Street Loves Nvidia's Investment. -- ASML Reports Record Orders Amid AI Chip Boom -- Zoom Stock Is Soaring. Its Investment in Anthropic Is a 'Hidden Gem.' -- Microsoft's New AI Chip Can't Keep Nvidia Stock Down
Write to Tae Kim at tae.kim@barrons.com or follow him on X at @firstadopter.
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January 28, 2026 16:02 ET (21:02 GMT)
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