ASML and TSMC Face Uncertainty Amid Tariffs and AI Demand Concerns

TSMC, ASML outlooks to reveal depths of tariff pain, AI pullback

Earnings from two chip-industry giants this week are poised to provide an early insight into issues that have punctured investor confidence and sent valuations to multiyear lows. Taiwan Semiconductor Manufacturing Co. and ASML Holding NV have born the brunt of a broader market selloff, weighed down by both U.S. tariff threats and doubts over future artificial intelligence demand. Chipmaker TSMC is down down roughly 20% this year and chip-equipment maker ASML has fallen 12%. The rout saw TSMC's forward price-to-earnings ratio hit a two-year low at one point, while pushing ASML to its cheapest level since the Covid pandemic. Concern over a potential slowdown in AI demand has intensified after a string of analyst warnings, while the tariff saga has thrown global businesses' decision making into a tailspin. All that has heightened investor focus on whether the appetite for AI chips can hold up. "Both ASML and TSMC are quite heavily discounted" and "a lot of risks have clearly been priced in," said Ben Barringer, a technology analyst at Quilter Cheviot. "But with uncertainty around what tariffs are going to look like for semiconductors, it is hard to see a re-rating without more concrete news to go off." While current quarterly earnings should show sales and income increasing sharply at both companies, the focus will be on their earnings guidance amid trade tensions and a worsening macro backdrop. Changes to outlooks are widely expected, while some analysts are bracing for guidance to be withdrawn altogether. Global semiconductor stocks showed some signs of relief on Monday, after the Trump administration exempted smartphones and other electronic devices from reciprocal tariffs, a win for iPhone maker Apple Inc. and its suppliers, including TSMC. ASML's chipmaking machines are also excused from extra levies. But the reprieve is likely to be brief, as the exemptions are temporary and the administration pushed forward with plans for tariffs on semiconductor and pharmaceutical imports by initiating probes on both sectors. Apart from direct tariffs, the concern is that higher levies across the board will restrain growth, boding ill for a sector that's highly sensitive to economic cycles. For chips used for AI workloads, even though they remain in hot demand, the question is how much longer that's going to last. "The eventual sectoral tariffs will make investing in U.S.-based data centers more risky, and perhaps catalyze a broader slowdown in new data center construction, which further adds to earnings risk of TSMC and the supply chain," said Morningstar analyst Phelix Lee. Industry headwinds aside, both TSMC and ASML are struggling with their own issues. Reports over a potential tie-up with the struggling Intel Corp. has clouded the outlook for TSMC, with analysts questioning the strategic merit of the move given the two firms' differences in business models and tool sets. It also pledged to invest $100 billion in the U.S., a potential drag on future margins. For ASML, spending plans at its key client Intel remain in flux, as the American chipmaker has just named a new chief executive. Meanwhile, another top customers, Samsung Electronics Co., faces production challenges in ramping up leading-edge chips. "Although TSMC and ASML have largely accounted for the impact of global trade tensions in their current cyclical trough valuations, we expect some near-term downside risk to earnings over the next two quarters," said Gary Tan, a portfolio manager at Allspring Global Investments. Bullish investors may argue that expectations have already been much tempered in the lead-up to results. The two companies' tech dominance remains unshaken. ASML's advanced lithography tools are essential for the making of all cutting-edge chips. TSMC's foundry services are crucial to Nvidia and Apple's chips as Intel and Samsung lag behind. Still, a growing chorus of analysts predicts weakness ahead, and many are lowering their share-price targets. While TSMC had projected mid-20% revenue growth for 2025, JPMorgan reckons the chipmaker will pare that slightly to target low- to mid-20% expansion. As for ASML, investors expect 2025 guidance remaining intact, while preparing for 2026 revenues to undershoot analysts estimates, a JPMorgan client survey showed. The company could also withdraw its guidance as customers adjust to tariffs, Deutsche Bank AG said. Nori Chiou, an investment director at White Oak Capital Partners, says chipmakers' upcoming results "are unlikely to be too bad," because AI demand is still robust. "However, the uncertainty around AI demand for next year is rising," Chiou said. "Policy volatility could impact how the next round of long-term planning gets made, and that's something worth watching closely."

ASML: Maximum uncertainty?

A rude awakening for ASML: two shocks in quick succession. On the one hand, disappointing quarterly results. On the other, new constraints for the sector signed by Donald Trump. While the American president has limited taxes on semiconductor equipment to 10%, he has also restricted exports of American chips to China. The result: the entire sector is feeling the pinch. But what are we to make of it? Tension is not abating between the two great powers. Each is striking where it hurts. Beijing is targeting Boeing, while Washington is curbing Chinese ambitions in artificial intelligence. In this tense climate, ASML's results, which were released at 7 a.m., were closely scrutinized by the markets. Orders well below expectations In fast-growing, sometimes exponentially growing, sectors, it is difficult to read trends. For electric cars, production indices and stocks in Tesla warehouses are a thermometer of the sector's temperature, for example. For semiconductors, a pillar of AI, it is ASML that acts as a barometer, through its order intake. Visible Alpha analysts were expecting orders worth €4.89bn. However, there was a nasty surprise: ASML only posted €3.9bn, almost a billion euros less. A sharp decline, especially compared with the €7.1bn in Q4 2024. Whereas other sectors are seeing their quarterly figures swell thanks to an acceleration in production and exports in view of the tariffs on the horizon, ASML is bucking the trend. Orders are plummeting. The reason: uncertainties about the future of the sector, which are putting chip manufacturers off. However, be careful not to cry disaster. The decline in orders does not tell the whole story. Sales are still up on last year, as is net profit. EPS and margins even exceed expectations. It's not enough to satisfy demanding investors, of course, but it's nothing dramatic. Especially since ASML warned that the quarterly publication of order intake will soon be abandoned (in 2026), as it is considered unrepresentative of the underlying trend. Management remains confident Company CEO, Christophe Fouquet, is reassuring: "Our conversations with customers so far confirm our expectation that 2025 and 2026 will be years of growth," Fouquet said in a statement. "However, recent tariff announcements have increased uncertainty in the macroeconomic environment and the situation will remain dynamic for some time." Regarding the group's news, the share buyback program is still ongoing, a dividend of €6.4 per share and the annual revenue forecasts have been maintained. The future is now in Washington's hands. New specific taxes on semiconductors are expected in the coming weeks. ASML, which exports from the Netherlands but also from its American factories, will inevitably be affected. If its customers are themselves targeted by these barriers, the impact could be even greater.

ASML says tariffs cloud outlook for 2025 and 2026

(Reuters) - ASML, the world's biggest supplier of computer chip-making equipment, said on Wednesday that tariffs were increasing uncertainty for its outlook for 2025 and 2026. The Dutch group's Chief Executive Officer Christophe Fouquet said his conversations with customers supported ASML's expectations that 2025 and 2026 would be growth years. "However, the recent tariff announcements have increased uncertainty in the macro environment," he said in a statement. The global race for AI has put ASML at the forefront of the industry, as the maker of the world's most advanced chip circuitry engraving system, the EUV lithography machine, which makes the chips of designers like Nvidia or Apple. Artificial intelligence continues to be the main growth driver for ASML, Fouquet said in the quarterly earnings release. "It has created a shift in the market dynamics that benefits some customers more than others, contributing to both upside potential and downside risks as reflected in our 2025 revenue range," he added about AI. ASML's net bookings, the most closely watched figure in the industry, were 3.9 billion euros ($4.4 billion) in the first three months of 2025, below analysts' consensus estimate of 4.89 billion euros compiled by researcher Visible Alpha. (Reporting by Nathan Vifflin, editing by Milla Nissi)

ASML warns tariffs cloud outlook for 2025 and 2026

(Reuters) -ASML, the world's biggest supplier of computer chip-making equipment, said on Wednesday that tariffs were increasing uncertainty around its outlook for 2025 and 2026, but stood by its annual guidance as the race for AI rages on. CEO Christophe Fouquet said his conversations with customers supported ASML's expectations that 2025 and 2026 would be growth years. "However, the recent tariff announcements have increased uncertainty in the macro environment," Fouquet said in a quarterly earnings statement. ASML's net bookings, the most closely watched figure in the industry, missed estimates in the first quarter at 3.9 billion euros ($4.4 billion). The Dutch group is ready to pass most of the tariff costs onto customers, CFO Roger Dassen said in a call with reporters. "The burden of tariffs from our vantage point should be allocated in a fair way," Dassen said. "We think that those taking it in the United States should, therefore, take the lion's share of that allocation." Dassen also said that ASML's U.S. operations were an asset because of the talent there, not tariffs. ASML is the second largest semiconductor equipment manufacturer in the U.S., he said, with about 20% of its workforce there. Tariffs could cost U.S. semiconductor equipment makers more than $1 billion a year, according to industry calculations discussed with officials, a Reuters report showed Tuesday. Dassen suggested free trade zones between Europe and the U.S. as an option to limit the cost of tariffs. ASML's parts get shipped back and forth several times between the continents. He also warned of the indirect impact on global economic growth, which could slow down the AI supply chain, but said AI expansions plans so far were "very strong, very concrete". Dassen also said Chinese demand was stronger than anticipated so far in 2025, while Nvidia took a $5.5 billion charge after the U.S. government Tuesday limited exports there. The global race for AI has put ASML at the forefront of the industry, as the maker of the world's most advanced chip circuitry engraving system, the EUV lithography machine, used to make chips designed by Nvidia and Apple. Artificial intelligence continues to be the main growth driver for ASML, Fouquet said. "It has created a shift in the market dynamics that benefits some customers more than others, contributing to both upside potential and downside risks as reflected in our 2025 revenue range," he added about AI. Analyst Timm Schulze-Melander from Redburn Atlantic said the AI push benefited TSMC and Nvidia more than Intel and Samsung. "It's great news that 2025 financial guidance remains unchanged -- or even worse than some were fearing, that perhaps guidance would be eliminated entirely," said Nick Rossolillo of Concinnus Financial which has held ASML shares since 2022. It forecast second-quarter sales of 7.2 billion to 7.7 billion euros, below analysts' expectations of 7.73 billion, according to LSEG data. At the top of the range, the sales would be in line with the first quarter. ASML's shares were down 5% by 0904 GMT, dragging peers ASM International , BE Semiconductor industries , Soitec , and chipmakers Infineon , STMicroelectronics lower. ($1 = 0.8814 euros) (Reporting by Nathan Vifflin and Leo Marchandon in Gdansk, editing by Milla Nissi)