TSMC vs ASML: Which Semiconductor Giant Is the Better Buy?

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2 days ago

The semiconductor industry has become a hot topic for investors as chip demand continues to grow.
The two semiconductor titans, Taiwan Semiconductor Manufacturing Company or TSMC (NYSE: TSM) and ASML Holdings NV (NASDAQ: ASML), have just released their latest earnings.
TSMC is the largest global semiconductor manufacturer for a multitude of applications such as high-performance computing (HPC).
ASML, on the other hand, plays a vital role in manufacturing lithography machines which craft the foundation of microchips.
With both giants playing crucial roles in the semiconductor industry, we size up these two behemoths to decide which presents a better buying opportunity.
Earnings recap
For the second quarter of 2025 (2Q 2025) ending 30 June 2025, TSMC saw a surge of 38.6% year-on-year (YoY) in net revenue to NT$933.8 billion.
The firm also reported an increase in net profit of 60.7% YoY to NT$398.27 billion.The improved financial numbers can be attributed to an increase in demand for artificial intelligence (AI) and HPC.
Consequently, there was a ramp up in the revenue growth of 5 nanometre (nm) and 3 nm chips, which made up 36% and 24% of total wafer revenue.
In the same period, ASML reported an increase of 23.2% YoY to €7.7 billion for 2Q 2025.
Additionally, ASML's net profit grew by 45.1% YoY to €2.3 billion.
This growth was contributed by an increase in demand for dynamic random-access memory chips and adoption of extreme ultraviolet (EUV) lithography machines.
The increase was also due to higher upgrade business which can be seen in the strong performance in installed base management sales of €2.1 billion.
Moreover, there were one-off cost-saving events for ASML in 2Q 2025 which drove their gross margins higher by 2.2 percentage points to 53.7% compared to the previous year.
Strategic developments
On 17 July 2025, TSMC was reported to be planning a global and local fab expansion.In Taiwan, this expansion includes 11 wafer manufacturing fabs and four advanced packaging facilities over the next few years.
Internationally, the company plans to develop a GIGAFAB in Arizona and more specialty fabs in Japan.
These plans will enable TSMC to increase the stickiness of its global clients who operate in diverse locations.Furthermore, global expansion also reduces the risk of supply chain bottlenecks from geopolitical conflicts such as the US-China trade tensions.In 2Q 2025, ASML shipped its first EXE:5200B system.
This system, which has better overlay performance, increases productivity through higher resolution and throughput.
The launch of this product strengthens ASML's technological innovation moat in the semiconductor industry.
ASML is then able to tap into the higher demand for EUV systems by providing a more sophisticated next-generation EUV product.
Optimistic guidance
TSMC's management expects a revenue growth of 30% in 2025 compared to the previous year which is fuelled by the rising demand in AI.
However, management does highlight that tariff policies may be a concern for their customer-related and price-sensitive market segments.
Meanwhile, ASML expects a total net sales growth of 15% along with a 52% gross margin for fiscal 2025.Similarly, management credits this confidence to the growth of the AI industry.
Management also highlights the risks from geopolitical tensions moving into 2026.
Get Smart: Weighing growth and risks
These two companies have their names etched into the chipmaking ecosystem.
As Smart Investors, it is important to evaluate the gains together with the risks of the opportunities presented.
At the end of the day, the decision lies in your investment objectives and risk appetite.
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Disclosure: Gabriel Lim does not own shares in any of the companies mentioned.
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