ASML vs. TXN: Which Semiconductor Stock Is the Better Buy Now?

Core Insights - ASML Holding and Texas Instruments are significant players in the semiconductor industry, with ASML focusing on advanced chip manufacturing equipment and Texas Instruments on analog and embedded chips [1][2] ASML Holding - ASML has a unique advantage in the chip equipment market as the only company capable of producing extreme ultraviolet (EUV) lithography machines at scale, essential for manufacturing chips at 5nm, 3nm, and soon 2nm levels [3][4] - The company is launching next-generation High-NA EUV machines, which will cater to the increasing demand for smaller and more efficient chips, particularly driven by AI growth [4] - In Q1 2025, ASML reported a revenue growth of 46% and a 93% increase in earnings per share, with an expected revenue increase of 15% for the full year [5] - ASML's exposure to China is a concern, as 41% of its shipments were to China in 2024, and U.S. export restrictions may limit future sales in that market [6] Texas Instruments - Texas Instruments focuses on analog and embedded chips, which are essential but exhibit slower growth compared to ASML's offerings [7] - The company derives 70% of its Q1 2025 revenues from industrial and automotive markets, with long-term growth opportunities in robotics, electric vehicles, and infrastructure automation [7][8] - In Q1 2025, Texas Instruments experienced an 11% revenue growth and a 6.7% rise in earnings per share, but these figures lag behind ASML's performance [10] - The personal electronics segment is underperforming, with revenues falling by mid-teens sequentially due to weak consumer demand and excess inventory [9] Financial Estimates and Valuation - ASML's 2025 sales and EPS estimates imply year-over-year growth of 21.5% and 30.5%, respectively, while Texas Instruments' estimates call for a 10.6% sales increase and a 6.7% EPS rise [13][16] - Year-to-date, ASML shares have increased by 7.7%, outperforming Texas Instruments' 0.5% rise [18] - ASML trades at a forward P/E multiple of 26.10X, lower than its three-year median, while Texas Instruments trades at a higher P/E of 32.14X, which is difficult to justify given its slower growth [20] Conclusion - ASML is positioned as the better investment option due to its unique technology, strong earnings growth, and favorable valuation, particularly in the context of increasing demand for AI and advanced chips [22]