Key Takeaways
- ASML holds a monopoly on essential EUV lithography machines, making it indispensable for the production of advanced AI chips at 3-nanometre nodes and below.
- TSMC is undertaking aggressive capital expenditure, potentially up to 32 billion US dollars in 2025, to expand its manufacturing capacity and meet surging AI-driven demand.
- The global semiconductor market is projected to surpass 1 trillion US dollars by 2030, with AI chips expected to constitute a significant portion of this growth.
- Both companies face geopolitical risks: ASML is affected by US-led export controls to China, while TSMC must navigate tensions in the Taiwan Strait, prompting strategic diversification like its new factories in Arizona.
The semiconductor industry stands at a pivotal moment in 2025, with artificial intelligence (AI) driving unprecedented demand for advanced chips. At the heart of this boom are ASML Holding NV and Taiwan Semiconductor Manufacturing Company (TSMC), two titans uniquely positioned to benefit from the surge. ASML’s monopoly on extreme ultraviolet (EUV) lithography machines, critical for producing cutting-edge chips, and TSMC’s aggressive capital expenditure plans signal a robust growth trajectory for both firms. This analysis delves into how these companies are navigating the AI-driven market, supported by current financial data and industry projections.
ASML’s Unrivalled Position in EUV Technology
ASML remains the sole global supplier of EUV lithography machines, a technology essential for manufacturing the smallest, most powerful chips required for AI applications. The company’s latest guidance for 2025 projects revenue between 30 billion and 35 billion euros, reflecting cautious optimism amid geopolitical tensions and export controls, particularly concerning China. However, the underlying demand from AI-focused chipmakers continues to bolster ASML’s order book. In Q2 2025 (April to June), ASML reported a year-on-year revenue increase, aligning with the broader recovery in the semiconductor sector.
One cannot overstate the strategic importance of ASML’s technology. Without EUV machines, producing chips at 3-nanometre nodes and below, which are vital for AI workloads, becomes impossible. While export restrictions to certain markets pose a risk, comments from industry observers on platforms like X, such as those from accounts like TacticzH, highlight a widely held sentiment that ASML is well-placed to ride the AI wave. The firm’s ability to innovate with High-NA EUV systems further cements its dominance, ensuring that even if short-term hiccups occur, long-term fundamentals remain strong.
TSMC’s Ambitious Capital Expenditure Plans
TSMC, the world’s largest contract chipmaker, is doubling down on capacity expansion to meet AI-driven demand. The company recently revised its 2025 revenue growth outlook upwards, projecting a significant increase fuelled by orders for advanced nodes. Reports indicate that TSMC’s capital expenditure for 2025 could reach up to 32 billion US dollars, a figure that underscores its commitment to maintaining leadership in the foundry space. This spending focuses on scaling production at cutting-edge nodes and expanding geographically, notably in the United States.
A key component of TSMC’s strategy is its investment in Arizona, where it plans to build three factories with a reported commitment of over 65 billion US dollars over the coming years. This move not only diversifies its manufacturing base amid geopolitical risks in Taiwan but also positions TSMC to capture a larger share of the North American market. In Q2 2025, TSMC reported a staggering 36% year-on-year profit increase, a clear indicator of robust demand for AI chips.
Market Growth and AI’s Dominance
The global semiconductor market is on track for sustained growth, with projections estimating a compound annual growth rate of around 13% through 2025. By 2030, the market is expected to surpass 1 trillion US dollars, with AI chips accounting for an estimated 30–35% of total demand. This shift reflects the increasing integration of AI across industries, from data centres to consumer electronics. For context, in 2023, the market size was approximately 600 billion US dollars, and the acceleration in 2024 and 2025 highlights the rapid pace of adoption.
The table below summarises key financial and market data for ASML and TSMC in 2025:
| Company | 2025 Revenue Guidance | Capital Expenditure (2025) | Key Market Driver |
|---|---|---|---|
| ASML | €30–35 billion | Not disclosed | EUV demand for AI chips |
| TSMC | Upward revision (exact figure pending) | Up to $32 billion | Advanced node production for AI |
Geopolitical Risks and Market Dynamics
Despite the bullish outlook, risks loom large. ASML faces uncertainty due to US-led export controls on advanced semiconductor equipment to China, a market that previously accounted for a significant portion of its revenue. Recent statements from ASML’s leadership suggest that any relaxation of these controls could spur additional demand, though the likelihood remains uncertain. TSMC, meanwhile, must navigate tensions in the Taiwan Strait, which could disrupt its operations. Its US expansion mitigates some of this risk, but at a steep cost.
One might wryly note that the semiconductor industry’s biggest threat isn’t a lack of demand but rather the political chessboard on which it operates. Still, both companies have demonstrated resilience, adapting to restrictions while capitalising on the AI boom. The interplay between technological necessity and geopolitical reality will likely define their trajectories through 2025 and beyond.
Conclusion: A Sector Poised for Growth
The AI chip surge has positioned ASML and TSMC as indispensable players in the semiconductor landscape. ASML’s monopoly on EUV technology ensures its relevance, even as it grapples with export challenges, while TSMC’s massive capital investments signal confidence in sustained demand. With the global chip market projected to grow robustly, reaching a trillion-dollar valuation by the decade’s end, the focus on AI as a primary driver is undeniable. Investors and industry watchers alike would do well to monitor how these firms balance innovation with external pressures in the coming quarters.
References
AInvest. (2025, July). ASML at China crossroads: Export controls & AI chip market. AInvest. Retrieved from https://www.ainvest.com/news/asml-china-crossroads-export-controls-ai-chip-market-2507/
AInvest. (2025, July). TSMC earnings surge: A bellwether for AI-driven demand and semiconductor valuations. AInvest. Retrieved from https://www.ainvest.com/news/tsmc-earnings-surge-bellwether-ai-driven-demand-semiconductor-valuations-2507/
ASML Holding NV. (2025, July). Q2 2025 Earnings Report. ASML Investor Relations.
Barchart. (n.d.). Advanced AI chip demand likely to aid Taiwan Semiconductor’s Q2 sales. Retrieved from https://barchart.com/story/news/33440498/advanced-ai-chip-demand-likely-to-aid-taiwan-semiconductor-s-q2-sales
Bloomberg. (2025, July 16). ASML CFO says easing China AI chip controls would boost demand. Retrieved from https://bloomberg.com/news/articles/2025-07-16/asml-cfo-says-easing-china-ai-chip-controls-would-boost-demand
CNBC. (2025, July 17). TSMC profit surges 36% to record high fueled by AI chip demand. Retrieved from https://www.cnbc.com/2025/07/17/tsmcs-second-quarter-profit-soars-nearly-36percent-as-ai-chip-demand-stays-strong.html
CNBC. (2025, July 17). TSMC’s second-quarter profit soars nearly 61% as AI chip demand stays strong. Retrieved from https://www.cnbc.com/2025/07/17/tsmcs-second-quarter-profit-soars-nearly-61percent-as-ai-chip-demand-stays-strong-.html
DigiTimes Asia. (2025, July 12). TSMC capital expenditure for 2025 seen at $28-32 billion. Retrieved from https://www.digitimes.com/news/a20250712PR204.html
Euronews. (2025, January 2). Will computer chip maker ASML see a change of fortunes in 2025? Retrieved from https://www.euronews.com/business/2025/01/02/will-computer-chip-maker-asml-see-a-change-of-fortunes-in-2025
McKinsey & Company. (2024, April). The semiconductor decade: Quantifying the $1 trillion opportunity. Retrieved from https://www.mckinsey.com/industries/semiconductors/our-insights/the-semiconductor-decade-quantifying-the-1-trillion-opportunity
Reuters. (2024, December 21). TSMC to spend $65 billion for three U.S. chip factories. Retrieved from https://www.reuters.com/technology/tsmc-raise-us-arizona-investment-65-billion-three-factories-2024-12-21/
Statista. (2025, June). Global semiconductor market revenue from 2015 to 2030. Retrieved from https://www.statista.com/statistics/266973/global-semiconductor-sales-since-1988/
TacticzH [@TacticzH]. (2025). [Post on X]. X. Retrieved from https://x.com/TacticzH/status/1925650498570391612
TacticzH [@TacticzH]. (2025). [Post on X]. X. Retrieved from https://x.com/TacticzH/status/1928454628846584088
TacticzH [@TacticzH]. (2025). [Post on X]. X. Retrieved from https://x.com/TacticzH/status/1929529631503258006
TacticzH [@TacticzH]. (2025). [Post on X]. X. Retrieved from https://x.com/TacticzH/status/1931372577647112544
TacticzH [@TacticzH]. (2025). [Post on X]. X. Retrieved from https://x.com/TacticzH/status/1936884016549859595
Taiwan Semiconductor Manufacturing Company. (2025, July 17). Q2 2025 Earnings Release. Retrieved from https://www.tsmc.com/english/investorRelations/quarterly_results.htm
Taipei Representative Office in the UK. (n.d.). Page Not Found. Retrieved from https://www.roc-taiwan.org/Embassy_Error/error-vpn_data_url.html
Technology Magazine. (n.d.). ASML projects €60bn revenue on AI chip demand, explained. Retrieved from https://technologymagazine.com/articles/asml-projects-60bn-revenue-on-ai-chip-demand-explained
TheFinance.sg. (2025, July 21). TSMC vs ASML: Which semiconductor giant is the better buy? Retrieved from https://thefinance.sg/2025/07/21/tsmc-vs-asml-which-semiconductor-giant-is-the-better-buy/
Yahoo Finance. (2025, July 17). TSMC raises 2025 outlook in a big boost for AI demand hopes. Retrieved from https://finance.yahoo.com/news/tsmc-raises-2025-outlook-big-070844740.html
