Shares of ASE Technology Holding surged 7.2% on Friday, closing at T$304.50, as investors cheered the company's ambitious capital investment strategy aimed at capturing growth in artificial intelligence packaging.
Record Spending Targets AI Demand
The semiconductor packaging and testing firm plans to elevate its capital expenditures to a historic $7 billion in 2026, a roughly 27% increase from the $5.5 billion spent last year. Management indicated that nearly two-thirds of this investment will be directed toward advanced packaging services, which are currently facing supply constraints due to strong demand.
"The AI server cycle continues," stated Chief Operating Officer Tien Wu. Finance Chief Joseph Tung projected that revenue from leading-edge services could at least double by 2026, though he cautioned that tight capacity might limit additional upside.
Near-Term Caution, Long-Term Optimism
While the long-term outlook is focused on expansion, ASE provided a more conservative near-term view. The company expects first-quarter revenue to decline 5% to 7% from the prior quarter, attributing the drop to a pronounced seasonal slowdown. Core packaging and testing revenue is also guided to slip 3% to 5%.
Despite the projected revenue dip, the company is confident in its improving profit profile. Tung highlighted that the gross margin is likely to improve each quarter this year, potentially reaching the upper end of the company's 25% target range. This improvement is driven by a business mix shift toward higher-margin advanced packaging (LEAP) and testing services.
The company's LEAP portfolio includes critical processes like wafer-on-substrate, a key component in chip-on-wafer-on-substrate (CoWoS) configurations essential for high-performance AI workloads.
Financial Performance and Market Watch
ASE reported fourth-quarter net income attributable to shareholders of NT$14.7 billion. For the full year 2025, net revenue reached NT$645.4 billion, with annual net income of NT$40.7 billion and basic earnings per share of NT$9.37.
The market's positive reaction carries inherent risks, including the potential for a broader tech sector downturn or a scenario where heavy capital spending outpaces returns if AI order growth moderates. Traders are now watching for follow-through momentum when markets reopen and await peer results, along with ASE's next quarterly report scheduled for April.