The semiconductor industry is experiencing a significant boost from the growing demand for artificial intelligence (AI) enabled chips. Two major players, ASML and Taiwan Semiconductor Manufacturing Company (TSM), are at the forefront of this trend. Both companies have crucial roles in the production of semiconductor chips, but which one is better positioned to capitalize on AI’s growth?
ASML, a leading supplier of lithography equipment, has been instrumental in enabling the development of advanced AI systems. Its extreme ultraviolet (EUV) lithography technology has enabled the creation of smaller, more powerful transistors, reducing energy consumption and increasing processing power per watt. This innovation is critical for AI systems, which require massive amounts of energy to operate.
Despite being a monopoly supplier of EUV lithography equipment, ASML’s shares have declined 7% in 2024 due to underwhelming guidance. However, the company expects its revenue to rise to $45.8 billion by 2030, driven by growth in AI.
TSMC, on the other hand, has a symbiotic relationship with ASML and is a key customer of its EUV machines. The company has mastered the production of 3nm chips, which represent the latest frontier in semiconductor manufacturing. These chips are crucial for AI, cloud computing, and more, and TSMC’s growth in this area is expected to continue.
TSMC’s valuation is lower than ASML’s, making it a better value proposition. The company has also secured lucrative contracts with major businesses, including Amazon Web Services (AWS), which relies on TSMC for custom AI chips using 3nm technology.
Given these factors, TSMC emerges as the better investment choice for those looking to capitalize on AI’s growth. With its significant market share and strong position in the production of advanced chips for AI, TSMC is well-positioned to ride the wave of this trend.
Source: https://www.fool.com/investing/2024/12/25/better-artificial-intelligence-stock-asml-taiwan