Better Chip Stock: ASML vs. TSMC

Core Viewpoint - ASML and TSMC are pivotal players in the semiconductor industry, with ASML being the largest producer of photolithography systems and TSMC being the largest contract chipmaker. TSMC has outperformed ASML in stock performance over the past year, raising questions about future investment potential [1][2]. ASML Overview - ASML's revenue grew by 14% in 2022 and 30% in 2023, driven by the AI market and competition among foundries [3]. - For 2024, ASML anticipates flat revenue growth due to the tapering of AI market expansion, export restrictions on Chinese chipmakers, and a transition to high-NA EUV systems [3][4]. - ASML revised its 2025 revenue growth forecast from 43% to a range of 7%-25%, attributing this to conservative adoption of high-NA EUV systems by major foundries [4][5]. TSMC Overview - TSMC's revenue increased by 34% in 2022 but saw a decline of 9% in 2023 due to market slowdowns [6]. - TSMC raised its full-year revenue outlook to nearly 30%, driven by AI market growth and stabilization in PC and smartphone markets [6]. - In its latest quarter, TSMC generated 51% of its revenue from high-performance computing (HPC) and 34% from the smartphone market [6][7]. Comparative Analysis - TSMC's revenue and earnings are expected to grow by 24% and 27%, respectively, in 2025, while ASML's growth is projected to be slower [7][8]. - TSMC's strategy of sticking with existing low-NA EUV systems for future nodes may provide cost savings and reduce exposure to export restrictions, unlike ASML [7]. - Both companies are valued at approximately 23 times forward earnings, but TSMC is seen as a stronger investment due to its growth rate and diversification [8].