Two names dominate the foundation layer of the AI economy, ASML Holding and Taiwan Semiconductor Manufacturing. They are not competitors in the traditional sense, ASML makes the tools, while TSMC makes the chips, but investors often find themselves choosing between the two.
Let’s break down the opportunities and risks for each, and see which one looks like the stronger bet for AI investors today.
Key Points
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ASML is the only supplier of EUV lithography machines critical for AI chips.
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With around 90% market share in advanced AI processors, soaring Q2 2025 earnings and strong customer demand from Nvidia and others, TSMC is the clear near-term winner.
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While both are vital to AI’s future, TSMC trades slightly cheaper than ASML.
ASML Is The Gatekeeper of EUV Technology
ASML occupies one of the most enviable monopolies in tech. It is the only company in the world capable of producing extreme ultraviolet lithography machines, the equipment needed to etch the tiniest features onto advanced chips. Each machine costs north of $150 million and the complexity is a competitive moat almost no rival can cross.
Every chipmaker from Intel to Samsung to TSMC must rely on ASML’s EUV tools to manufacture cutting-edge AI processors. In other words, ASML is the toll booth operator on the semiconductor superhighway.
But this privileged position doesn’t make the company immune to headwinds. U.S. export controls and tariffs are creating uncertainty around ASML’s ability to ship its most advanced systems to Chinese customers.
Management cut its 2025 revenue forecast to about €32.5 billion, and investors noticed, ASML shares are down around 13% over the past year. For a stock once viewed as a pure play on AI infrastructure, that stumble has raised questions about near-term upside.
TSMC Is The World’s Foundry for AI
While ASML sells the shovels, TSMC is the gold miner actually digging chips out of silicon. It’s the undisputed leader in advanced chip manufacturing, commanding an estimated 90% share of the AI processor market. Nvidia, AMD, Apple, and virtually every major chip designer depend on TSMC to bring their blueprints to life.
The AI boom is directly fueling its financials. In Q2 2025, TSMC’s revenue jumped to $30 billion, while net income soared 61%. Management expects AI-related sales to double this year alone.
TSMC’s edge is its relentless investment in process technology and it is moving from 3-nanometer production into 2-nanometer nodes by 2026, a leap that will deliver chips that are smaller, faster, and more energy efficient, exactly what AI models require as they scale.
While Intel talks about catching up, and Samsung makes incremental progress, TSMC continues to set the pace.
Over the past 12 months, TSMC stock has sprinted higher, outpacing not just ASML but also the broader S&P 500.
What You Might Be Missing
TSMC’s fabs are concentrated in Taiwan, making the company vulnerable to geopolitical shocks in the Taiwan Strait. That risk is real, but management is diversifying with new fabs in Arizona and Japan, projects that could reduce concentration risk over time.
Both firms are capital-hungry. TSMC spends upwards of $30 billion annually on new fabs, while ASML must constantly advance lithography technology. These massive outlays can strain free cash flow, even when revenue is strong.
ASML trades at about 28x earnings, slightly richer than TSMC’s 26x. That’s not a huge spread, but in a high-rate environment, cheaper multiples can matter.
The AI boom is still in early innings, but at some point, growth rates will normalize. TSMC, with its customer diversification, smartphones, autos, and IoT alongside AI, may have a more balanced runway than ASML, which is more directly tied to capital-spending cycles.
TSMC Has the Edge
ASML enjoys an irreplaceable technological monopoly, while TSMC holds the commanding position as the world’s most advanced chipmaker.
But right now, TSMC looks like the better investment. Revenues and earnings are accelerating, its market share is unmatched, and the stock is handily outperforming.
Meanwhile, ASML’s near-term growth is clouded by export restrictions and tariff uncertainty, making it harder for investors to see a clear catalyst. That doesn’t mean ASML is a poor choice long-term, the company remains indispensable. But if you’re looking for the semiconductor name most likely to ride AI demand higher in the next couple of years, TSMC is the one delivering results today.