Demand for advanced computing power links two of the chip industry’s best-known companies. ASML Holding (ASML -1.69%) makes the lithography systems that chipmakers use to print circuits on silicon, and Taiwan Semiconductor Manufacturing (TSM -1.98%)known as TSMC, is a contract manufacturer that makes chips for other companies.
The two also work together. In a joint release in September, ASML and TSMC said they had formed an initiative to move High NA EUV lithography to larger photomasks, and that TSMC intends to use ASML’s High NA technology in high-volume manufacturing for advanced nodes starting in 2030.
Investors often compare them because their businesses are closely linked, even though their financial profiles differ.
ASML & TSM: Performance Comparison
Key Financial Metrics
ASML – ASML
$1,750.24
–1.69% (–$30.10)
TSM – Taiwan Semiconductor Manufacturing
$444.35
–1.98% (–$8.96)
Market Cap
$675B
52wk Range
$946.11 – $1,999.96
Gross Margin
52.73%
P/E Ratio
54.44
EPS (TTM)
$32.12
Dividend & Yield
$9.08 (0.52%)
Market Cap
$2.3T
52wk Range
$266.82 – $487.47
Gross Margin
63.08%
P/E Ratio
32.07
EPS (TTM)
$13.86
Dividend & Yield
$3.77 (0.85%)
ASML – ASML
$1,750.24
–1.69% (–$30.10)
Market Cap
$675B
52wk Range
$946.11 – $1,999.96
Gross Margin
52.73%
P/E Ratio
54.44
EPS (TTM)
$32.12
Dividend & Yield
$9.08 (0.52%)
TSM – Taiwan Semiconductor Manufacturing
$444.35
–1.98% (–$8.96)
Market Cap
$2.3T
52wk Range
$266.82 – $487.47
Gross Margin
63.08%
P/E Ratio
32.07
EPS (TTM)
$13.86
Dividend & Yield
$3.77 (0.85%)
The case for ASML
ASML supplies chipmakers with lithography systems and related software and services used to print circuit patterns on silicon wafers. Its flagship products include Extreme Ultraviolet (EUV) and Deep Ultraviolet (DUV) machines used to produce advanced chips. ASML says it is currently the world’s only manufacturer of EUV lithography systems. According to ASML’s 2025 annual report, four customers accounted for about 61% of ASML’s 2025 net sales.
ASML reports its results in euros, and the annual figures here are approximate conversions to U.S. dollars. In 2025, revenue reached nearly $36.6 billion, up roughly 15.6% from the previous year. The company reported net income of about $10.8 billion for the period, resulting in a net margin of nearly 29.4%.
For the quarter ended June 28, 2026, ASML reported net sales of 9.3 billion euros and a gross margin of 54%. In July, it raised its 2026 outlook to total net sales of 43-45 billion euros.
Based on its December 2025 balance sheet, ASML’s debt-to-equity ratio, calculated from total debt and shareholders’ equity, is about 0.2x. This ratio compares total debt to shareholders’ equity, indicating modest borrowing relative to shareholders’ equity.
The current ratio, also calculated from the balance sheet, measures the ability to pay short-term obligations with assets expected to convert to cash within a year, and is roughly 1.3x. Free cash flow, which ASML calculates as operating cash flow minus purchases of property, plant, and equipment and intangible assets, was approximately $12.4 billion for the year.
The case for Taiwan Semiconductor Manufacturing
TSMC operates as a pure-play foundry, meaning it manufactures chips for customers rather than designing its own. In 2025, it manufactured 12,682 products for 534 customers, with demand coming from markets such as high-performance computing and smartphones. Advanced technologies at 7 nanometers and below accounted for 74% of its 2025 wafer revenue.
TSMC reports its results in New Taiwan dollars, and the annual figures here are approximate conversions to U.S. dollars.
In 2025, revenue reached roughly $121.3 billion, up about 31.6% in New Taiwan dollars and 35.9% in U.S. dollars, according to TSMC. The company earned net income of about $54.7 billion, for a net margin of approximately 45.1%.
For the quarter ended June 30, 2026, TSMC reported revenue up 36% year over year in New Taiwan dollars, with a gross margin of 67.7%.
Based on TSMC’s December 2025 balance sheet, I calculate a current ratio of roughly 2.5x to 2.6x, depending on which of TSMC’s year-end statements is used. That means current assets are about two and a half times current liabilities.
The debt-to-equity ratio, calculated as interest-bearing debt divided by total equity, is approximately 0.2x, a modest level of debt relative to shareholder equity. Free cash flow, calculated by subtracting capital expenditures from operating cash flow, reached about NT$1.0 trillion, or approximately $32 billion at the converted rate, for the fiscal year.
Risk profile comparison
ASML’s customer concentration is a risk, since a change in spending plans at any one of its four largest customers can move its results. Because its customers are chipmakers that decide when to add capacity, a slowdown in industry spending would reduce demand for its systems.
Export controls are another factor. ASML’s annual report says, “Changes in export controls may have a material impact on our business for example on the sales volume, mix and timing,” and China accounted for about 29% of its 2025 net sales in the geographic breakdown of its annual report.
According to its interim report, which attributes sales to the location of customers’ facilities, China’s share fell to about 16% of net sales in the first half of 2026.
TSMC’s business requires heavy, continuing investment in factories and technology, with capital expenditures of about $40.9 billion in 2025, according to TSMC. Geopolitical risk is the other main concern, since the majority of its principal production facilities are in Taiwan. TSMC also faces competition from other foundries, including Intel (INTC -3.20%)which TSMC’s chief executive described as a formidable competitor on the April 2026 earnings call, and Samsung Electronics (SSNLF +0.00%)which TrendForce estimates ranked second in foundry revenue in the second quarter of 2026.
TSMC’s customer base is also concentrated at the top, as its annual report shows two customers accounted for 19% and 17% of 2025 net revenue. Demand for TSMC’s chips also depends on its customers’ end markets, including smartphones and consumer electronics, so weakness in those categories would affect sales.
Valuation comparison
TSMC has the lower forward P/E of the two in the table, and the two companies are close on price-to-sales. The P/S ratio measures a company’s market value against its past twelve months of sales. The forward P/E compares the stock price to future earnings estimates.
| Metric | ASML | Taiwan Semiconductor Manufacturing |
|---|---|---|
| Forward P/E | 42.8x | 28.0x |
| P/S ratio | 18.2x | 17.5x |
Valuation metrics include sourcing from Financial Modeling Prep (FMP) and may differ from other data providers.
Which stock would I buy in 2026?
While TSMC looks like the better buy to me, I’d be a patient buyer, as shares of both companies have risen sharply over the past year and TSMC’s production is concentrated in Taiwan.
My reasoning starts with the fact that each business depends on its customers. Both are concentrated.
TSMC’s two largest customers accounted for about 36% of its 2025 net revenue, according to its annual report, and four customers accounted for about 61% of ASML’s 2025 net sales. TSMC also serves 534 customers in total, so the business has a broader base beyond its largest accounts. ASML says it is currently the world’s only manufacturer of EUV lithography systems, which is a strong foundation, though it also means a handful of chipmakers shape demand.
TSMC also carries the lower forward earnings multiple in the table, which adds to its appeal for me.
If I were buying, I’d start with a modest TSMC position and add to it over time, planning to hold for years. Sharp pullbacks can happen with both stocks, and if the business still looked sound after one, I’d treat it as a chance to add more.
Source: www.fool.com
