What the roller coaster earnings at ASML and TSMC tell us about demand for AI chips

Core Viewpoint - The semiconductor market is experiencing volatility, with ASML's disappointing earnings contrasting sharply with TSMC's strong performance, indicating ongoing growth in AI chip demand in the short to medium term [1][2][9]. Group 1: Company Performance - ASML reported a significant drop in stock price by 16% following a reduction in guidance for the next year, marking its largest single-day decline since 1998 [5]. - TSMC achieved a record third-quarter net profit of 325.3 billion New Taiwan Dollars, equivalent to $10.1 billion, reflecting a 54% increase driven by robust AI demand [5][7]. - Other chip stocks, including Nvidia, AMD, and Broadcom, experienced declines following ASML's report but stabilized afterward [5]. Group 2: Market Dynamics - TSMC's customer base includes major players like Nvidia, AMD, and Qualcomm, positioning it as a key indicator of AI chip demand [4]. - The semiconductor industry is characterized by varied demand across subsegments, with AI chips experiencing growth while other areas, such as PCs, face weaker demand [6]. - Analysts suggest that while ASML's slowdown may indicate caution, the overall trend points to sustained demand for AI applications and advanced chips [9]. Group 3: Future Outlook - TSMC's CEO emphasized the tangible ROI benefits of AI applications, asserting that the growth is genuine and not a bubble [8]. - The ongoing AI boom is expected to continue driving strong demand for chipmakers, with upcoming earnings reports from other firms like Qualcomm and Intel likely to provide further insights into market conditions [9].