The semiconductor industry experienced a dramatic two-day swing this week as contrasting earnings reports from ASML and Taiwan Semiconductor Manufacturing Co. (TSMC) painted divergent pictures of the AI chip market. On Tuesday, ASML, the Dutch manufacturer of advanced lithography machines essential for chipmaking, sent shockwaves through the market by slashing its 2025 guidance, triggering its largest single-day stock drop since 1998 with a 16% plunge. The selloff rippled across the semiconductor sector, with Nvidia falling nearly 5%, AMD dropping 5.3%, and Broadcom declining 3.5%.
However, by Thursday, TSMC delivered a starkly different narrative with record-breaking third-quarter results. The world’s largest contract chipmaker reported a 54% surge in net profit to 325.3 billion New Taiwan dollars (approximately $10.1 billion), driven primarily by robust demand for AI chips. TSMC’s CEO C.C. Wei firmly rejected concerns about an AI bubble, emphasizing that the return on investment from AI applications is “tangible” and benefiting companies across industries.
The divergence between these two chip industry giants can be explained by their distinct customer bases and market positions. ASML sells expensive lithography equipment to chipmakers including TSMC, Samsung, and Intel. The latter two companies have faced significant challenges—Intel is undergoing a major restructuring with 15,000 layoffs, while Samsung recently apologized for poor financial performance. According to Morningstar equity analyst Javier Correonero, “Intel and Samsung are falling behind TSMC from a technological point of view,” creating customer-specific problems that don’t reflect overall AI demand.
In contrast, TSMC serves the AI industry’s leading players, including Nvidia, AMD, and Qualcomm, making it a more accurate bellwether for AI chip demand. The company’s strong performance demonstrates that while some semiconductor subsegments like PCs remain weak, AI-related chip demand continues accelerating.
Industry analysts note that chipmakers expanded capacity during the pandemic and are now pulling back on equipment orders, contributing to ASML’s weaker outlook. However, Kate Leaman, chief market analyst at AvaTrade, emphasized that “AI applications, data centers, and advanced chips are still driving strong demand,” suggesting ASML’s slowdown may be temporary while companies like TSMC continue benefiting from high-growth AI sectors.
Key Quotes
This is a tangible ROI benefit. We cannot be the only one company that have benefited from this AI application. So I believe a lot of companies right now are using AI and further on improving productivity, efficiency, and everything.
TSMC CEO C.C. Wei made this statement during Thursday’s earnings call in response to JPMorgan analyst Gokul Hariharan’s question about AI being in a bubble. Wei’s comments directly challenge skepticism about AI’s economic value and underscore that the chip demand surge is driven by real business applications delivering measurable returns.
Intel and Samsung are falling behind TSMC from a technological point of view. This is just customer-specific problems as Intel and Samsung cannot ramp up new nodes properly, but this has nothing to do with demand.
Javier Correonero, equity analyst at Morningstar, explained to Business Insider why ASML’s disappointing results don’t necessarily signal weakening AI chip demand. His analysis highlights that ASML’s struggles stem from specific customers’ technological challenges rather than broader market weakness, providing important context for understanding the semiconductor market’s complexity.
In the short to medium term, AI applications, data centers, and advanced chips are still driving strong demand. So while ASML might be experiencing a temporary slowdown, companies like TSMC could continue delivering strong results thanks to these high-growth areas.
Kate Leaman, chief market analyst at AvaTrade, offered this assessment to explain the divergent performance between chip equipment makers and leading-edge chipmakers. Her perspective suggests that ASML’s weakness may be cyclical rather than structural, while AI-focused companies remain positioned for continued growth.
For now, the AI boom seems to be sustaining solid growth for chipmakers.
Kate Leaman’s concluding observation captures the overall market sentiment following TSMC’s strong earnings. Despite volatility and mixed signals from different semiconductor companies, the fundamental driver—AI demand—remains robust and continues supporting growth for companies positioned in the right market segments.
Our Take
The ASML-TSMC earnings contrast reveals a maturing AI chip market where technological leadership increasingly determines winners and losers. TSMC’s record profits validate the AI infrastructure investment thesis, but the story goes deeper than simple demand confirmation. We’re witnessing a competitive shakeout where companies unable to manufacture cutting-edge chips—like Intel and Samsung—are losing ground to TSMC, which has become indispensable to AI leaders like Nvidia.
The semiconductor market’s segmentation is critical to understand. While AI chips surge, traditional segments like PCs languish, creating mixed signals that can mislead investors focusing on aggregate chip demand. ASML’s guidance cut reflects overcapacity from pandemic-era expansion and struggles at specific customers, not AI weakness.
Looking ahead, TSMC’s dominance raises strategic concerns about supply chain concentration in geopolitically sensitive Taiwan. As AI becomes more central to economic competitiveness, this dependency will likely intensify efforts to diversify advanced chip manufacturing, though TSMC’s technological lead makes this challenging in the near term.
Why This Matters
This earnings divergence provides crucial insights into the health and trajectory of the AI chip boom that has dominated technology markets throughout 2024. TSMC’s record-breaking results confirm that demand for AI infrastructure remains robust despite persistent questions about AI’s return on investment, validating the massive capital expenditures tech giants are making in AI data centers and computing power.
The contrasting fortunes of ASML and TSMC also highlight growing competitive gaps in the semiconductor industry. TSMC’s technological leadership is attracting the most lucrative AI-related business, while competitors like Intel and Samsung struggle to keep pace with advanced manufacturing nodes. This consolidation of cutting-edge chip production could have significant implications for global technology supply chains and geopolitical competition.
For investors and businesses, these results suggest the AI infrastructure buildout is far from complete, with continued strong demand for advanced chips likely to persist. However, the semiconductor market’s complexity—with different subsegments experiencing varying demand levels—underscores the importance of distinguishing between AI-driven growth and broader chip market trends. As more chipmakers report earnings in coming weeks, a clearer picture will emerge of whether the AI boom can sustain the semiconductor industry’s growth trajectory.
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Source: https://www.businessinsider.com/asml-tsmc-earnings-demand-ai-chips-2024-10