Investing.com -- Chip equipment stocks led a sector-wide rally Thursday after Taiwan Semiconductor Manufacturing Co. announced a significant increase in capital expenditure plans and a robust revenue growth forecast for 2026.

Lam Research shares jumped 7%, Applied Materials surged 8%, KLA Corporation climbed 6%, and Teradyne rose 3% following TSMC’s announcement. The world’s largest contract chipmaker forecasted capital expenditure for 2026 of $52 billion to $56 billion, substantially exceeding analysts’ consensus estimate of approximately $46 billion.

TSMC also indicated that its capital expenditure would be "significantly higher" over the next three years compared to the $101 billion spent over the past three years. Additionally, the company projected revenue growth of close to 30% in 2026.

The positive outlook from TSMC rippled through the broader semiconductor sector. NVIDIA and AMD both gained 1%, while Broadcom rose 2%. Memory chip manufacturers also benefited, with Micron Technology climbing 3%, Western Digital advancing 3.6%, and Seagate adding 2%.

TSMC’s aggressive investment plans signal strong confidence in continued demand for advanced semiconductor manufacturing capacity, particularly as artificial intelligence applications drive the need for more sophisticated chips.