-
ASML makes machinery that is unique and essential to the semiconductor machinery.
-
Taiwan Semiconductor is the leading producer of advanced processors in the world.
-
TSMC's sales and earnings growth outpace ASML's, and more growth is likely ahead.
-
10 stocks we like better than Taiwan Semiconductor Manufacturing ›
The artificial intelligence (AI) boom has been fueled by large tech companies developing impressive AI models that can handle increasingly complex tasks. But a sometimes overlooked aspect of AI are the companies that manufacture complex processors that make those models possible.
Two such semiconductor manufacturing companies are ASML (NASDAQ: ASML) and Taiwan Semiconductor Manufacturing (NYSE: TSM), often referred to as TSMC. While both have their strengths, which one looks like the better stock right now? Here's what's happening with each, and which one is likely the better AI stock.
ASML has a unique angle in the processor manufacturing market through its extreme ultraviolet (EUV) lithography system that's used to make AI processors. These machines are very complex and not easily replicated, which is why ASML is one of the few companies in the world with these machines. This means that any semiconductor manufacturing company that needs one of these machines has to come to ASML for it.
Despite this opportunity, it's not all sunshine and rainbows for ASML's business. The company is reeling from President Donald Trump's tariffs, and management said recently that potential growth in 2026 will be affected by them. ASML CEO Christophe Fouquet said on the Q2 earnings call: "We continue to see increasing uncertainty driven by macroeconomic and geopolitical developments. Therefore, while we still prepare for growth in 2026, we cannot confirm it at this stage."
That's a shift from management's previous stance that the company would grow significantly this year and next. The company also lowered its estimated sales for this year to about 32.5 billion euros, down from its previous estimate of up to 35 billion euros.
That uncertainty has caused ASML's shares to plunge recently, dropping 13% over the past 12 months. And with investors still unsure how tariffs will impact the company over the next couple of years, they're right to be a little wary.
Taiwan Semiconductor also has a unique position in the AI space. The company is the leading manufacturer of AI processors, with an estimated 90% of the advanced processor market. This means that when AI giants, including Nvidia, need AI processors made, Taiwan Semiconductor is often their first choice.