ASML's $45.06 billion backlog and lithography monopoly give it defensive AI edge over Applied Materials

KLA Corporation is benefiting from accelerating artificial intelligence infrastructure spending, which is driving higher investments in leading-edge foundry and logic technologies and boosting demand for its process-control solutions. In fiscal 2026, the Semiconductor Process Control segment's revenues increased 12% year over year, and overall fiscal 2026 revenues rose 12% year over year to $13.58 billion. During the fourth quarter of fiscal 2026, management raised its calendar 2026 wafer-fabrication equipment market estimate, including advanced packaging, to the low-$150 billion range, up from its previous $140 billion-plus view and approximately $120 billion in calendar 2025. KLAC expects second-half 2026 revenues to be approximately 20% higher than the first half, aided by high-performance computing, high-bandwidth memory, increasing extreme ultraviolet adoption in DRAM and advanced packaging technologies such as hybrid bonding, and said backlog was expected to reach about $12.5 billion. The company faces intensifying competition from Applied Materials, which expects its process diagnostics and control business to grow more than 50% in calendar 2026, and from ASML, which expects advanced foundry and logic revenues to rise about 25% in 2026 and extreme ultraviolet revenues to increase roughly 45%.

ASML Holding N.V. is riding strong momentum in its Installed Base Management business, which generated 2.8 billion euros in sales in the second quarter, up 31.8% year over year and about €300 million above management's expectations. The business benefits from the large and expanding fleet of ASML systems already operating at semiconductor manufacturers, and continued expansion of the EUV installed base is increasing the company's overall service opportunity. Demand is being driven not only by fleet expansion but also by software-led upgrades that improve productivity without significant machine time or production disruption. ASML expects to ship about 65 Low-NA EUV systems in 2026, with EUV revenue projected to rise roughly 45%, and management expects the combination of upgrade and service revenue to drive more than 30% growth in Installed Base Management sales in 2026. Sustaining that pace will depend on continued semiconductor investment and customer demand. Elsewhere in the semiconductor space, Monolithic Power Systems is gaining content across AI infrastructure and has extended its capacity goal beyond $6 billion, while Applied Materials delivered a record third quarter on the rapid global build-out of AI infrastructure.

Taiwan Semiconductor Manufacturing has moved its 2nm process into commercial production and raised its capital expenditure targets to support the rollout. The chipmaker said the higher spending is preparation for an intensifying global semiconductor arms race among leading foundries and chip designers. The accelerated 2nm commercialization keeps TSMC aligned with chip designers that need leading-edge capacity for AI and high-performance computing, and the bigger budget gives it more room to secure large multi-year supply commitments from major customers. One early indicator to watch is how quickly 2nm and related advanced nodes contribute a rising share of wafer revenue as new lines ramp up, including whether customer wins such as the MediaTek 2nm decision broaden into multiple large-volume programs that keep those advanced fabs near targeted utilization levels from 2026 onward.