Can AI Packaging Demand Boost ASE Technology's Long

Can AI Packaging Demand Boost ASE Technology's Long-Term Growth?

ASE Technology Holding ASX is benefiting from the growing demand for AI chip packaging. In the first quarter of 2026, ASX's Assembly, Testing and Materials (ATM) business performed better than expected despite fewer working days and did not experience the usual seasonal slowdown. Management said AI-related products are changing the normal demand pattern, helping reduce the impact of seasonality on the business.

Advanced packaging continues to be the main growth driver. ASE reported record ATM revenues of NTD 112.4 billion in the first quarter, up 2% sequentially and 30% year over year. Higher factory utilization and a larger contribution from Leading Edge Advanced Packaging (LEAP) services were the key contributors to growth. The company said demand for AI and computing products remained strong, while growth in advanced packaging and wirebond services helped offset softer demand in some consumer markets.

ASE is also increasing investments to support future growth. The company raised its 2026 capital spending plan and increased its LEAP revenue outlook by 10%. It now expects LEAP revenues to exceed $3.5 billion in 2026. Management said the additional investment will help expand capacity to meet growing customer demand and help drive further growth in the company's LEAP in the upcoming years.

The company is seeing demand not only from AI accelerator chips but also from AI-related power management, connectivity, sensors and edge devices. At the same time, it is expanding its advanced packaging technologies, including full-process packaging, CoWoS-like packaging and panel-level packaging, to support future AI applications. If AI infrastructure spending remains strong, ASE is well-positioned to benefit from the growing demand for advanced semiconductor packaging.

The Zacks Consensus Estimate for 2026 and 2027 indicates revenue growth of around 19.6% and 22.4%, respectively.

How Competitors Fare Against ASE Technology

ASE Technology faces stiff competition from the likes of Amkor Technology AMKR and Intel INTC in advanced semiconductor packaging.

In June 2026, Amkor Technology and Taiwan Semiconductor Manufacturing Company announced a 10-year partnership to expand advanced semiconductor packaging and testing capabilities in Arizona. Both companies will work together to expand capacity and better meet growing customer demand. The partnership will support AMKR's goal of providing customers with a complete U.S.-based semiconductor supply chain, covering advanced chip manufacturing, packaging and testing.

Intel is also increasing its focus on advanced packaging through Intel Foundry. In the first quarter of 2026, Intel Foundry witnessed robust growth in its backlog for advanced packaging services. The company has announced a multi-year expansion of its back-end manufacturing facility in Malaysia to support future demand. Revenue contribution from this capacity is expected to begin in 2027. Here, advanced packaging is expected to remain a key growth driver that will help the company benefit from growing AI demand.

ASX's Price Performance, Valuation & Estimates

Shares of nVent Electric have surged 146.6% year to date compared with the Zacks Electronics - Semiconductors industry’s return of 40.4%.

ASX YTD Price Return Performance

From a valuation standpoint, ASX trades at a forward price-to-earnings ratio of 34.62X, higher than the industry’s average of 31.42X.

The Zacks Consensus Estimate for ASX’s 2026 and 2027 earnings per share (EPS) implies year-over-year growth of 47.4% and 73.2%, respectively. EPS estimates for 2026 have been revised down by 21 cents over the past 30 days, while the same for 2027 have been revised upward by 2 cents over the past 30 days.

ASX currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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ASE Technology Holding Co., Ltd. (ASX): Free Stock Analysis Report

Intel Corporation (INTC): Free Stock Analysis Report

Amkor Technology, Inc. (AMKR): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).