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ASML vs. TSM: Which Semiconductor Powerhouse Offers More Upside?
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Key Takeaways
TSM posted a 41% revenue and 39% EPS gain in Q3 2025 amid soaring AI chip demand.
Delays in orders and revenue recognition are casting doubt on the continuity of ASML's near-term growth.
TSM plans $40B-$42B in 2025 capex, with 70% devoted to advanced processes to meet rising AI demand.
ASML Holding N.V. (ASML - Free Report) and Taiwan Semiconductor Manufacturing Company (TSM - Free Report) are two of the critical players in the global semiconductor supply chain. ASML, a Dutch-based company, builds the extreme ultraviolet (EUV) lithography systems needed to fabricate the world’s most advanced chips. Meanwhile, TSM, based in Taiwan and also known as TSMC, is the largest contract chipmaker globally.
Both companies are essential to the production of high-performance computing and artificial intelligence (AI) chips. However, from an investment point of view, one stock offers a more favorable outlook than the other right now.
The Case for ASML Holding Stock
ASML Holding has a clear advantage in the chip equipment market. It is the only company capable of producing extreme ultraviolet (EUV) lithography machines at scale. These machines are needed to make chips at 5nm, 3nm and soon 2nm levels — key to powering AI processors, mobile devices and data centers.
The company is already rolling out its next-generation High-NA EUV machines, which will be used for even smaller chips. As the demand for faster and more efficient chips rises, especially with the growth of AI, ASML Holding stands to benefit. Its machines are a necessary part of the chip supply chain, and its customers, including TSMC, Intel and Samsung, will rely on ASML’s technology for years to come.
Despite its technological superiority, the ongoing trade war between the United States and China is likely to continue hurting ASML Holding’s growth in the near term. U.S. pressure on the Dutch government has led to export restrictions on some of ASML’s most advanced equipment.
The company’s sales growth has already slowed down. In the last reported results for the third quarter of 2025, revenues increased by a mere 0.7% year over year, significantly lower than 23% in the second quarter and 46% in the first quarter. Similarly, earnings per share grew 3.8% year over year compared with 47% in the second quarter and 93% in the first quarter.
ASML Holding N.V. Price, Consensus and EPS Surprise
The company has previously stated that ongoing U.S.-China tariff discussions, including the Section 232 tariff review, are negatively impacting customer capital spending timelines. This hesitation may delay orders and revenue recognition, casting doubt on the continuity of near-term growth.
The Case for Taiwan Semiconductor Stock
Taiwan Semiconductor continues to dominate the semiconductor foundry space. TSMC is known for its advanced production capabilities and has already moved into 3nm production, with 2nm coming soon. Its large scale allows it to handle rising AI chip demand better than most competitors. The company has established itself as the preferred manufacturing partner for AI accelerators, including GPUs and custom silicon developed by major players like NVIDIA, Marvell Technology and Broadcom.
The ongoing AI boom has placed TSMC at the center of a multi-year structural growth cycle. AI-related revenues tripled in 2024 and are expected to double again in 2025. Taiwan Semiconductor’s latest earnings report highlights just how dominant the company remains. In the third quarter of 2025, TSM’s revenues surged 41% year over year to $33.1 billion, while earnings per share (EPS) jumped 39% to $2.92.
Taiwan Semiconductor Manufacturing Company Ltd. Price, Consensus and EPS Surprise
To keep up with the growing demand for AI chips, Taiwan Semiconductor is spending aggressively. The company is set to invest between $40 billion and $42 billion in capital expenditures in 2025, far outpacing its $29.8 billion investment in 2024. The bulk of this spending, around 70%, is focused on advanced manufacturing processes, ensuring TSMC stays ahead of other chip manufacturing rivals.
Despite its strengths, Taiwan Semiconductor witnesses near-term hurdles. Escalating geopolitical tensions, particularly U.S.-China relations, pose strategic risks. With significant revenue exposure to China, Taiwan Semiconductor is vulnerable to export restrictions, supply-chain disruptions or further regulatory pressure. These uncertainties could weigh on near-term performance.
The company’s global expansion strategy adds further strain. New fabs in the United States (Arizona), Japan and Germany are vital for geopolitical risk mitigation, but they come with higher costs. These facilities are expected to drag down gross margins by 2-3 percentage points annually over the next three to five years due to higher labor and energy costs, along with lower utilization rates in the early stages.
ASML vs. TSM: Which Stock Has a Greater Growth Profile?
Looking at the Zacks Consensus Estimate for revenues and EPS, Taiwan Semiconductor has a steadier long-term growth profile than ASML Holding. The consensus mark for TSMC’s 2025 and 2026 revenues indicates year-over-year growth of 33.7% and 20.6%, respectively. Non-GAAP EPS is expected to rise 43.9% in 2025 and 20.2% in 2026.
Estimates for ASML Holding’s revenues and EPS for 2025 suggest growth of 23.2% and 39.3%, respectively. However, this growth rate is anticipated to decelerate to 3.9% for revenues and 3.8% for EPS in 2026.
ASML vs. TSM: Price Performance and Valuation
Year to date, shares of ASML Holding and Taiwan Semiconductor have surged 61.6% and 54.1%, respectively.
Image Source: Zacks Investment Research
On the valuation front, Taiwan Semiconductor trades at 25.06 times forward earnings compared to 37.26 times for ASML Holding. While both companies are of high quality, TSMC appears to be more reasonably priced, especially considering its stronger growth outlook.
While both companies are essential to the future of semiconductor manufacturing, Taiwan Semiconductor stands out as the better investment option at this time. It offers stronger near-term earnings stability and a more attractive valuation. ASML Holding remains a long-term winner, thanks to its unmatched lithography technology, but its rich valuation and short-term headwinds make it less appealing than TSMC.
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ASML vs. TSM: Which Semiconductor Powerhouse Offers More Upside?
Key Takeaways
ASML Holding N.V. (ASML - Free Report) and Taiwan Semiconductor Manufacturing Company (TSM - Free Report) are two of the critical players in the global semiconductor supply chain. ASML, a Dutch-based company, builds the extreme ultraviolet (EUV) lithography systems needed to fabricate the world’s most advanced chips. Meanwhile, TSM, based in Taiwan and also known as TSMC, is the largest contract chipmaker globally.
Both companies are essential to the production of high-performance computing and artificial intelligence (AI) chips. However, from an investment point of view, one stock offers a more favorable outlook than the other right now.
The Case for ASML Holding Stock
ASML Holding has a clear advantage in the chip equipment market. It is the only company capable of producing extreme ultraviolet (EUV) lithography machines at scale. These machines are needed to make chips at 5nm, 3nm and soon 2nm levels — key to powering AI processors, mobile devices and data centers.
The company is already rolling out its next-generation High-NA EUV machines, which will be used for even smaller chips. As the demand for faster and more efficient chips rises, especially with the growth of AI, ASML Holding stands to benefit. Its machines are a necessary part of the chip supply chain, and its customers, including TSMC, Intel and Samsung, will rely on ASML’s technology for years to come.
Despite its technological superiority, the ongoing trade war between the United States and China is likely to continue hurting ASML Holding’s growth in the near term. U.S. pressure on the Dutch government has led to export restrictions on some of ASML’s most advanced equipment.
The company’s sales growth has already slowed down. In the last reported results for the third quarter of 2025, revenues increased by a mere 0.7% year over year, significantly lower than 23% in the second quarter and 46% in the first quarter. Similarly, earnings per share grew 3.8% year over year compared with 47% in the second quarter and 93% in the first quarter.
ASML Holding N.V. Price, Consensus and EPS Surprise
ASML Holding N.V. price-consensus-eps-surprise-chart | ASML Holding N.V. Quote
The company has previously stated that ongoing U.S.-China tariff discussions, including the Section 232 tariff review, are negatively impacting customer capital spending timelines. This hesitation may delay orders and revenue recognition, casting doubt on the continuity of near-term growth.
The Case for Taiwan Semiconductor Stock
Taiwan Semiconductor continues to dominate the semiconductor foundry space. TSMC is known for its advanced production capabilities and has already moved into 3nm production, with 2nm coming soon. Its large scale allows it to handle rising AI chip demand better than most competitors. The company has established itself as the preferred manufacturing partner for AI accelerators, including GPUs and custom silicon developed by major players like NVIDIA, Marvell Technology and Broadcom.
The ongoing AI boom has placed TSMC at the center of a multi-year structural growth cycle. AI-related revenues tripled in 2024 and are expected to double again in 2025. Taiwan Semiconductor’s latest earnings report highlights just how dominant the company remains. In the third quarter of 2025, TSM’s revenues surged 41% year over year to $33.1 billion, while earnings per share (EPS) jumped 39% to $2.92.
Taiwan Semiconductor Manufacturing Company Ltd. Price, Consensus and EPS Surprise
Taiwan Semiconductor Manufacturing Company Ltd. price-consensus-eps-surprise-chart | Taiwan Semiconductor Manufacturing Company Ltd. Quote
To keep up with the growing demand for AI chips, Taiwan Semiconductor is spending aggressively. The company is set to invest between $40 billion and $42 billion in capital expenditures in 2025, far outpacing its $29.8 billion investment in 2024. The bulk of this spending, around 70%, is focused on advanced manufacturing processes, ensuring TSMC stays ahead of other chip manufacturing rivals.
Despite its strengths, Taiwan Semiconductor witnesses near-term hurdles. Escalating geopolitical tensions, particularly U.S.-China relations, pose strategic risks. With significant revenue exposure to China, Taiwan Semiconductor is vulnerable to export restrictions, supply-chain disruptions or further regulatory pressure. These uncertainties could weigh on near-term performance.
The company’s global expansion strategy adds further strain. New fabs in the United States (Arizona), Japan and Germany are vital for geopolitical risk mitigation, but they come with higher costs. These facilities are expected to drag down gross margins by 2-3 percentage points annually over the next three to five years due to higher labor and energy costs, along with lower utilization rates in the early stages.
ASML vs. TSM: Which Stock Has a Greater Growth Profile?
Looking at the Zacks Consensus Estimate for revenues and EPS, Taiwan Semiconductor has a steadier long-term growth profile than ASML Holding. The consensus mark for TSMC’s 2025 and 2026 revenues indicates year-over-year growth of 33.7% and 20.6%, respectively. Non-GAAP EPS is expected to rise 43.9% in 2025 and 20.2% in 2026.
Estimates for ASML Holding’s revenues and EPS for 2025 suggest growth of 23.2% and 39.3%, respectively. However, this growth rate is anticipated to decelerate to 3.9% for revenues and 3.8% for EPS in 2026.
ASML vs. TSM: Price Performance and Valuation
Year to date, shares of ASML Holding and Taiwan Semiconductor have surged 61.6% and 54.1%, respectively.
Image Source: Zacks Investment Research
On the valuation front, Taiwan Semiconductor trades at 25.06 times forward earnings compared to 37.26 times for ASML Holding. While both companies are of high quality, TSMC appears to be more reasonably priced, especially considering its stronger growth outlook.
Image Source: Zacks Investment Research
TSM: A Better Bet Than ASML
Both Taiwan Semiconductor and ASML Holding are set to benefit from the AI-driven semiconductor investment cycle. Also, the two companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
While both companies are essential to the future of semiconductor manufacturing, Taiwan Semiconductor stands out as the better investment option at this time. It offers stronger near-term earnings stability and a more attractive valuation. ASML Holding remains a long-term winner, thanks to its unmatched lithography technology, but its rich valuation and short-term headwinds make it less appealing than TSMC.