Investing.com -- B. Riley is framing this week's second-quarter earnings reports from ASML and TSMC as "tone-setting" for the entire semiconductor and semiconductor capital equipment sector, arguing that a $880 billion surge in AI infrastructure spending has arrived roughly 12 months ahead of the firm's prior forecasts.

The firm's comments makes clear that results and guidance from both companies carry outsized signal value for the broader chip supply chain.

The core of B. Riley's thesis rests on an acceleration in hyper-scale AI capital expenditure that has outpaced the firm's own projections. CY26 guidance from the major hyper-scalers has jumped to approximately $695–725 billion, a level B. Riley had previously assigned to CY27.

When Oracle's roughly $90 billion commitment is added alongside neo-cloud players CoreWeave ($31–35B) and NBIS ($20–25B), B Riley's CY26 total AI capex estimate rises to approximately $880 billion, with CY27 potentially crossing $1.02 trillion.

That spending surge carries direct implications for TSMC's upcoming guidance. B. Riley suspects that if TSMC reclassifies CPUs into its high-performance computing AI accelerator taxonomy, CY26 headline sales could be guided up 500 basis points to growth of +35% year-over-year.

"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," Citi analysts said in their preview note.

The catalyst for that potential reclassification is agentic AI's rising CPU orchestration intensity, which B. Riley notes is sharply lifting the x86 and ARM server total addressable market to an AMD-estimated $120 billion by 2030, representing a 35% CAGR. NVIDIA's Vera CPU alone carries approximately $20 billion in CY26 revenue visibility, the firm adds.

"If TSMC adds CPUs into its HPC AI accelerator taxonomy, we suspect CY26 headline sales could guide up 500bps to +35% YY," analysts wrote.

On the capital equipment side, B. Riley believes CY26 industry wafer fab equipment spending has moved solidly above the $140 billion-plus levels cited by KLA Corp and Lam Research, and suspects CY27 could approach $170 billion-plus. TSMC's own capex is expected to come in above the Street consensus of $55.6 billion for CY26, with CY27 spending seen rising a further 15%-plus on top of that elevated base.

Memory represents a longer-dated but potentially significant additional tailwind. B. Riley notes that much of CY26 memory capex remains focused on facilities construction, with the tool-spending mix not expected to accelerate meaningfully until CY27, per recent Micron guidance. The firm's conclusion: peak memory tool demand "may still be a few years away," leaving a longer runway for equipment suppliers than current consensus might imply.

The backdrop heading into these reports is complicated by a sharp macro-driven sell-off. Despite this turbulence, B. Riley sees the drawdown as creating an entry point rather than a fundamental inflection.

"Overall, risks persist as noted in 7/13's 'Taiwan Monthly Sales….'), though a continued strong demand arc should lift C26-28 consensus EPS further, the trajectory offering upward catalyst potential for recently weak shares," the firm wrote.

For investors looking for specific expressions of the theme, B. Riley identifies four names with attractive fundamental setups heading into the earnings cycle. The firm rates Ichor Holdings Buy with a $125 price target, FormFactor also Buy at $165, and Onto Innovation is Buy at $365 across semi-cap equipment.

On the on-cycle semiconductor side, B. Riley highlights Silicon Motion with a $312 price target, arguing that its enterprise product cycles and revenue mix transformation are "just beginning."