A few months ago, fears of an artificial intelligence (AI) bubble abounded in the financial media. And while those fears aren't gone, they seem to have quieted down for the time being.
That's likely due to the sheer amount of money the biggest companies in the tech industry plan to throw at their AI programs this year.
- Microsoft announced a relatively modest 66% capital expenditure (capex) increase to $37.5 billion for 2026.
- Meta Platforms is planning to spend anywhere from $162 billion to $169 billion, up over 37% from 2025's number.
- Alphabet is set to double its capex to between $175 billion and $185 billion this year.
- And Amazon has projected a 51% increase in its capex to $200 billion for 2026.
Hundreds of billions of dollars have already been funneled into AI hardware buildout because data centers aren't cheap. They can cost anywhere from $7 million to $12 million per megawatt just to build. Add in the power bill and maintenance costs and it only gets pricier.
And there are two pick-and-shovel plays in the tech industry that will profit (albeit indirectly) from just about every data center built anywhere in the world.
Image source: Getty Images.
Chip and shovel
Up first is Taiwan Semiconductor Manufacturing (TSM 4.96%), the world leader in the pure foundry segment of the semiconductor industry. As of the end of Q3 2025 it controlled a 72%-and-growing share of the market with No. 2 Samsung Electronics controlling just 7%.
Taiwan Semiconductor doesn't design any of its own chips; it simply manufactures them for other companies. And that client list includes Apple and Nvidia, which has its Blackwell chip produced at Taiwan Semiconductor's factory in Arizona.
This company is the reason the country of Taiwan produces 60% of the world's semiconductors and 90% of its advanced chips, which are semiconductors of 7 nanometers or smaller and are necessary for advanced AI algorithms.
Taiwan Semiconductor has such control over the market, it's nearing monopoly status, and it has the balance sheet to prove it.
For 2025, the company brought in revenue of $122.42 billion, up 35.9% year over year. It grew its diluted earnings per share (EPS) 46%, its operating cash flow surged 24.6%, and its free cash flow was up 15.2%.
NYSE: TSM
Key Data Points
Every data center needs the semiconductor chips Taiwan Semiconductor produces, and it has an extremely large moat to protect its market dominance.
But where Taiwan Semiconductor is almost a monopoly, ASML Holding (ASML 2.53%) is a monopoly.
High profits in the low countries
ASML is the world's only supplier of the extreme ultraviolet (EUV) lithography machines needed to produce the advanced chips Taiwan Semiconductor manufactures.
Each of these lithography machines is about the size of a bus and costs almost half a billion dollars. The less advanced deep ultraviolet (DUV) lithography machines are offered by some of ASML's competitors. They can produce larger semiconductor chips, but if you want to make the most advanced chips, you need EUV lithography, and ASML is the only game in town.
ASML is swamped with new orders and making money hand over fist.
Total sales for 2025 totaled 32.6 billion euros, up 15% over 2024's number. Its net bookings for Q4 of last year more than doubled from 5,399 to 13,158, which means demand for ASML's lithography machines is skyrocketing.
The company also saw its basic EPS for 2025 grow 28.4% over 2024 to 24.73 Euros and it's currently running a net profit margin of 29.42% .
NASDAQ: ASML
Key Data Points
A monopoly? Maybe. But it's an incredibly well-run monopoly.
And between ASML and Taiwan Semiconductor, you have a two-ticker play on the entire tech industry and the AI capex war the big tech companies are engaged in.
Who wins that war remains to be seen, but the chip-and-shovel plays in this article will come out on top regardless because they're foundational to all of the AI efforts. That makes the two of them worth a look in my opinion.
