ASML vs TSMC: Which AI Stock Reigns Supreme?

ASML and Taiwan Semiconductor are key players in the semiconductor industry, with ASML manufacturing complex processors for AI models and TSMC producing advanced processors for AI giants. While ASML has a unique advantage with its extreme ultraviolet lithography system, its growth is affected by President Trump's tariffs. TSMC's sales and earnings growth outpace ASML's, and more growth is likely ahead. TSMC is the leading producer of advanced processors in the world.

Taiwan Semiconductor Manufacturing Company (TSMC) has solidified its position as the leading producer of advanced processors in the world, capturing an unprecedented 70.2% market share in the second quarter of 2025. This achievement is driven by a surge in demand for AI accelerators, smartphones, and next-generation PCs, as well as TSMC's technological leadership in advanced manufacturing processes [1]. TSMC's revenue hit $30.24 billion, an 18.5% increase from the previous quarter, underscoring the company's robust financial performance.

TSMC's success can be attributed to its leadership in advanced manufacturing processes, with nearly three-quarters of its sales coming from 7nm nodes and below. The company's cutting-edge 3nm process alone accounts for approximately 25% of wafer revenue, enabling the production of high-performance chips for Nvidia's Blackwell GPUs, AMD's Zen 5 CPUs, and Apple's M-series Macs. TSMC's superior advanced packaging capabilities have given it a significant edge over competitors [1].

Meanwhile, ASML, a key player in the semiconductor industry, faces challenges due to President Trump's tariffs on semiconductors. While ASML has a unique advantage with its extreme ultraviolet lithography system, its growth has been impacted by these tariffs. In contrast, TSMC's sales and earnings growth have outpaced ASML's, with TSMC's market share expected to reach 75% by 2026. TSMC is preparing to commence mass production of 2nm chips in Q4 2025, with Apple securing initial supply, and is planning a $49 billion investment in a new facility for 1.4nm chip production [1].

However, TSMC faces challenges, including allegations of corporate espionage leading to employee dismissals and arrests, and international trade tensions. Rumors suggest that chips produced in TSMC's Arizona-based foundry could cost up to 30% more due to tariffs [2]. TSMC is also phasing out all Chinese technology from its new 2nm production lines to avoid potential US sanctions, as part of the proposed US "Chip EQUIP Act" [2].

For consumers and industry professionals, TSMC's dominance presents a mixed outlook. While the increased production capacity may alleviate shortages seen in recent years, it's unlikely to result in lower prices. The company's upcoming 2nm node is expected to carry a price premium over the current 3nm process, potentially leading to higher costs for end products [1].

In conclusion, TSMC's dominance in the semiconductor industry is evident, with its technological leadership and robust financial performance driving growth. Meanwhile, ASML faces challenges due to tariffs, but its unique advantage in extreme ultraviolet lithography remains a significant asset. As TSMC continues to solidify its position, its influence on technological advancements and market dynamics is set to grow further in the coming years.

References:
[1] https://theoutpost.ai/news-story/tsmc-dominates-semiconductor-market-with-record-breaking-70-share-in-q2-2025-19747/
[2] https://www.tomshardware.com/tech-industry/semiconductors/u-s-govt-revokes-tsmcs-authorization-to-ship-tools-to-its-fabs-in-china-special-export-license-to-be-pulled-by-end-of-2025