Better Semiconductor Stock: TSMC vs. ASML

• TSMC is the world’s largest and astir precocious declaration chipmaker.

• ASML provides the lithography tools that alteration TSMC to nutrient those chips.

• One of these linchpins faces much headwinds than the other.

• 10 stocks we similar amended than Taiwan Semiconductor Manufacturing ›

TSMC (NYSE: TSM) and ASML (NASDAQ: ASML) are some linchpins of the semiconductor market. Taiwan Semiconductor Manufacturing (TSMC) is the world's largest and astir precocious declaration chipmaker. ASML is the largest shaper of lithography systems, which are utilized by TSMC and different foundries to optically etch circuit patterns onto silicon wafers. ASML is besides the lone shaper of utmost ultraviolet (EUV) lithography systems which are utilized to manufacture the world's smallest and densest chips.

By adopting ASML's EUV systems astatine a faster complaint than Intel (NASDAQ: INTC) and Samsung, TSMC pulled up successful the "process race" to nutrient smaller chips. Today, astir of the world's apical fabless chipmakers -- including Nvidia (NASDAQ: NVDA), AMD, Apple, and Qualcomm -- outsource their accumulation to TSMC. Over the past 5 years, TSMC's banal astir tripled arsenic ASML's banal much than doubled. Let's spot wherefore some stocks soared, and which 1 is the amended wide concern close now.

From 2020 to 2024, TSMC's yearly gross grew astatine a CAGR of 24% arsenic its net per stock (EPS) accrued astatine a CAGR of 19%. That robust maturation was driven by the market's beardown request for its 5nm chips, the wide accumulation of its smaller 3nm chips, and the secular enlargement of the high-performance computing (HPC) market, which included Nvidia's almighty information halfway GPUs for processing artificial quality (AI) applications.

TSMC's precocious packaging technologies besides boosted its gross margins per chip, and it utilized AI to streamline its ain process power and worldly handling technologies. It besides built much overseas fabs to trim its vulnerability to a imaginable subject struggle betwixt Taiwan and China.

In the 3rd 4th of 2025, TSMC generated 60% of its gross from its smallest 3nm and 5nm nodes. In presumption of platforms, it generated 57% of its gross from the HPC market, 30% from smartphone makers, and the remainder from different industries. During that net report, TSMC lifted its full-year gross guidance from astir 30% maturation to mid-30% growth. CEO C.C. Wei attributed that rosier outlook to the AI megatrend generating beardown tailwinds for Nvidia and different AI chipmakers.

From 2024 to 2027, analysts expect TSMC's gross to EPS to turn astatine a CAGR of 24% and 27%, respectively. Those are awesome maturation rates for a banal that inactive trades astatine 19 times guardant earnings. Its upcoming catalysts see the enlargement of the AI market, the stabilization of the PC and smartphone markets, and the representation market's caller maturation cycle. Its newest 2nm node and its adoption of ASML's newest "high-NA" EUV systems -- which tin nutrient adjacent smaller chips -- should support it acold up of its rivals.