ASML's Guidance Cut vs. TSMC's Record Earnings: What the AI Chip Supply Chain Tells Us About Future Growth

The AI semiconductor revolution is reshaping the global technology landscape, but two of its most critical players—ASML and TSMC—are navigating this transformation through vastly different lenses. In Q2 2025, TSMC delivered record earnings while ASML tempered expectations for the remainder of the year. This divergence in performance and outlook offers a masterclass in how business models shape exposure to AI-driven demand—and what it means for investors.

The Dual Engines of the AI Chip Supply Chain

ASML and TSMC represent two distinct but symbiotic forces in the semiconductor ecosystem. ASML, the world's leading supplier of lithography machines, operates as the "enabler" of advanced chip manufacturing. Its EUV (extreme ultraviolet) lithography systems are essential for creating the smallest, most powerful chips required for AI and high-performance computing. TSMC, the world's largest chip foundry, is the "executor," transforming these enabling technologies into the actual chips that power everything from data centers to smartphones.

This fundamental difference in business models creates divergent risk/reward profiles. ASML's revenue depends on the cyclical capital expenditures of foundries and IDMs (Integrated Device Manufacturers), while TSMC's performance is more directly tied to utilization rates and demand for its manufacturing services. ASML's machines can take years to design and deploy, whereas TSMC can scale production more quickly in response to demand spikes.

Q2 2025: A Tale of Two Earnings Reports

TSMC's Q2 2025 results were nothing short of extraordinary. With revenue hitting $30.1 billion (NT$933.8 billion) and net income of $2.47 billion (NT$398.3 billion), the foundry giant demonstrated the full force of the AI tailwind. Its high-performance computing (HPC) segment—encompassing AI chips and 5G components—accounted for 60% of total revenue, up from 52% in Q2 2024. TSMC's gross margin of 58.6% and operating margin of 49.6% further underscored its pricing power and operational efficiency. The company is now forecasting full-year 2025 revenue growth of approximately 30%, driven by AI demand and the ramp-up of its 3nm and 2nm technologies.

ASML, by contrast, reported strong Q2 results but issued a more cautious outlook. Net sales of €7.7 billion were at the top end of guidance, with a gross margin of 53.7% and net income of €2.3 billion. The company's installed base management segment—upgrades and services for existing equipment—contributed €2.1 billion in revenue. However, ASML cut its Q3 guidance, projecting sales of €7.4-7.9 billion (down from previous expectations) and a gross margin of 50-52%. The company also warned it cannot confirm growth for 2026 due to macroeconomic uncertainty, geopolitical tensions, and the potential for 30% U.S. tariffs on semiconductor equipment.

Demand Signals in the AI Semiconductor Ecosystem

The contrast in these companies' outlooks reveals critical insights into the AI semiconductor supply chain. TSMC's performance suggests that demand for AI chips is not just strong but accelerating. Its HPC segment now represents more than half of its revenue, a stark shift from just a year ago. This trend is supported by Deloitte's forecast that AI chips will be worth $150 billion in 2025 and potentially $500 billion by 2028. TSMC's aggressive $38-42 billion capital expenditure plan for 2025—nearly half of which will fund U.S. manufacturing—further signals confidence in the AI-driven growth story.

ASML's caution, meanwhile, reflects the challenges of being a capital equipment supplier in a volatile macroeconomic environment. While its EUV bookings (€2.5 billion in Q2) highlight strong demand for the technology that enables AI chips, the company's guidance cut indicates that foundries and IDMs are delaying major CAPEX decisions. This behavior is likely driven by uncertainty around trade policies, interest rates, and the sustainability of the current AI boom. ASML's 15% full-year sales growth forecast—while still positive—falls short of the 30% growth TSMC expects, underscoring the differing stages of the capital cycle these companies occupy.

Investment Implications: Balancing Exposure in the AI Supply Chain

For investors, the key takeaway is the importance of diversifying across the AI semiconductor supply chain. TSMC's results suggest that the demand for AI chips is robust and growing, making it a compelling play for near-term growth. However, ASML's role as the enabler of advanced manufacturing technology cannot be ignored. The company's EUV systems are critical for producing the next generation of AI chips, and its backlog of €33 billion provides visibility for future revenue.

That said, investors should be mindful of the risks inherent in ASML's business model. The company's inability to confirm 2026 growth highlights the vulnerability of capital equipment suppliers to macroeconomic shifts. TSMC, by contrast, benefits from its near-term visibility in the form of high utilization rates and long-term customer contracts.

The Road Ahead

The AI semiconductor ecosystem is at a pivotal juncture. TSMC's record earnings confirm that the demand for AI chips is here to stay, while ASML's guidance cut reminds us that the broader economic environment remains uncertain. For investors, this dynamic presents both opportunities and challenges. Those seeking growth should consider overweighting TSMC's exposure to the AI chip manufacturing boom. For those with a longer-term horizon, ASML's leadership in EUV technology and its role in enabling next-generation chips (including High-NA EUV) offer compelling upside potential—provided macroeconomic risks can be managed.

In the end, the AI revolution is not a single story but a complex tapestry of interdependent players. TSMC and ASML may tell different tales in their earnings reports, but together, they paint a picture of an industry poised for transformation—and one that demands a nuanced investment strategy.