The AI-fueled memory boom has made Sandisk and Micron Technology the most visible winners. Their storage products are in critically short supply, driving sharp gains in both revenue and earnings. But the opportunity in memory extends far beyond the chipmakers themselves. Further up the supply chain, two companies with monopoly-like positions are capturing the long-term benefits of AI capital spending in a more stable way: ASML (ASML), the dominant supplier of lithography equipment, and TSMC (TSM), the leading contract chip manufacturer.
ASML builds advanced chipmaking equipment used by foundries, memory producers, and integrated device manufacturers. In its most recent quarter, memory accounted for 49% of ASML’s system sales. Management expects memory-related net system sales to jump 75% in 2026, driven by new capacity being added to meet surging demand for high-bandwidth memory (HBM) and DRAM.
Memory chips play a mission-critical role in AI data centers, and the supply gap remains wide. Micron announced in February that its 2026 HBM capacity was already sold out, with customers signing multi-year agreements to lock in long-term supply. This is pushing memory makers to invest aggressively in new equipment. Deloitte estimates that capital expenditures by major memory manufacturers will rise 67% in 2026 to $97 billion, followed by another 50% increase in 2027 to $146 billion.
ASML sits at the center of this expansion as the sole supplier of extreme ultraviolet (EUV) lithography machines. Memory manufacturers rely on EUV systems to lower production costs and build more advanced chips with higher performance and better energy efficiency. That monopoly pricing power gives ASML a clear long-term growth runway as memory capital spending continues to climb.
Unlike Sandisk, which is directly exposed to the memory cycle, TSMC’s logic chip foundry business carries significantly lower volatility. Hedge fund manager Stanley Druckenmiller sold Sandisk and bought TSMC in the second quarter. Sandisk has been one of the top performers in the S&P 500 this year, surging nearly 900% at its peak before the end of June. The stock has since pulled back sharply but still holds a year-to-date gain of more than 500%. If Druckenmiller exited near the late-June peak, he likely locked in substantial profits.
TSMC’s 2026 return has been less spectacular, but a nearly 40% gain for a company valued above $2 trillion is hardly modest. Wall Street’s average price targets imply roughly 33% upside for TSMC over the next year, versus 41% for Sandisk. The gap is not large, but the risk profiles are fundamentally different. The memory industry is notoriously cyclical, with violent swings in pricing and capacity. TSMC’s logic foundry segment, by contrast, enjoys steadier demand. AI accelerators, CPUs, and other core computing chips almost all require advanced process nodes, and AI hyperscaler capital spending is expected to persist through the end of the decade. That gives TSMC a more dependable long-term demand base than memory producers.
What ASML and TSMC share is that neither directly bears the risk of memory price cycles. No matter which memory maker wins, capacity expansion requires lithography equipment from ASML. No matter which AI chip architecture prevails, advanced fabrication runs through TSMC. This “toll collector” position makes both companies the common denominator of AI capital expenditure.
When memory is undersupplied and prices surge, the chipmakers reap outsized profits. But when the cycle turns and prices fall, demand for upstream equipment and foundry services is still supported by long-term capacity additions and technology upgrades. Drawdowns tend to be smaller.
On valuation, ASML’s profit margin currently trails Sandisk and Micron, but its monopoly pricing power leaves room for margin expansion. TSMC’s margin profile and growth stability already exceed most memory peers. As the AI investment cycle continues, these two upstream giants offer a more balanced risk-reward trade than betting directly on the memory cycle.
