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Which Semiconductor Equipment Stock Has More Upside in 2026?
Author: Nathan Reiff. Article Posted: 1/26/2026.
Key Points
- Three key makers of semiconductor manufacturing equipment have rallied by at least 65% in the last year, making them prime targets for investors in 2026.
- Of these, ASML and Lam Research have unique corners of the fabrication market that could prove essential as AI chip demand continues to grow.
- Applied Materials has so far lacked the same niche focus, which could be partially responsible for its recent minor revenue dip.
As earnings season picks up for semiconductor stocks, investors will want to assess which companies are best positioned for near-term gains. Outside the largest players like NVIDIA Corp. (NASDAQ: NVDA) and TSMC (NYSE: TSM), the field is crowded with firms across market capitalizations. Among companies below the $1 trillion threshold, three have delivered particularly strong growth in recent years—ASML Holding N.V. (NASDAQ: ASML), Applied Materials Inc. (NASDAQ: AMAT), and Lam Research Corp. (NASDAQ: LRCX). Comparing these firms can help investors decide which might stand out in the year ahead.
ASML's Dominance in Lithography Is Unquestioned, But How Much Will It Return?
Although ASML is one of the larger companies in the chipmaking ecosystem, it does not fabricate chips itself. Instead, it manufactures photolithography tools that other firms use to produce semiconductor products. It also stands out as a non-U.S. semiconductor stock at a time when tariff and trade uncertainty remain elevated. The company has performed very well over the past year, with shares rising about 80%.
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See the three moves before the AI split happensASML is well positioned to keep its lead in 2026 thanks to its critical lithography products, which remain essential to many chipmakers. Beyond its current dominance, ASML continues to advance its technology.
Notably, the company's high-NA extreme ultraviolet (EUV) system is its most advanced lithography tool to date, and ASML aims to scale production of these machines over the next two years. The company has effectively cornered a crucial segment of the semiconductor manufacturing market and maintains a significant technological edge over most competitors.
One concern for investors is ASML's near-term upside potential—analysts project only about 2% upside. Still, despite the strong rally, ASML's price-to-earnings ratio of 55.4 is well below the sector-wide average of 78.5.
Applied Materials' Revenue and Chinese Market Headwinds Linger
Like ASML, Applied Materials supplies equipment and software for semiconductor manufacturing and does not make chips itself. Unlike ASML, AMAT does not have a single niche product that guarantees an indispensable role for all customers. That said, it remains well positioned: growing demand for memory products amid constrained supply could support revenue acceleration in coming quarters.
Investors should watch this company's revenue performance. In the most recent earnings report, Applied Materials posted revenue that was down 3.5% year-over-year (YOY), even as many peers reported significant growth.
A major factor behind AMAT's muted revenue was its exposure to the Chinese market, which has faced headwinds related to trade restrictions. Those challenges are likely to persist in the near term. Still, Applied Materials has introduced a new product that could help it gain share in advanced packaging for AI chips, and 22 of 33 analysts rate AMAT a Buy.
However, after shares rose nearly 65% over the past 12 months, those analysts forecast downside of roughly 11% from current levels.
Lam Research Benefits From Recurring Revenue, But Can the Recent Rally Continue?
Lam Research supplies wafer-fabrication equipment used to manufacture semiconductor products, with tools that have become increasingly important as AI chip designs grow more complex.
Because of the nature of its tools, Lam Research stands out for strong high-margin recurring revenue streams. That recurring revenue helps insulate the company from cyclical downturns, though such slowdowns appear unlikely in the near term given robust AI-driven demand.
Lam recently reported $5.3 billion in revenue, up nearly 28% YOY, for the most recent quarter. As customers upgrade to the latest versions of Lam's products, the company should continue to see upgrade- and conversion-driven sales growth. One potential concern is that Lam's recent surge—an impressive 168% in 2025—may have been too rapid.
Analysts now expect the shares to cool, forecasting about a 12% decline despite generally strong Buy ratings.
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