today witnessed an upward trajectory in ASML's share price.
ASML's shares soared by 5% around midday Thursday, as reported by S&P Global Market Intelligence. This surge can be attributed to the optimistic financial outlook presented by ASML's primary customer, Taiwan Semiconductor Manufacturing Company (TSMC), during their fourth-quarter earnings call.
TSMC, a leader in the semiconductor industry, outperformed analysts' expectations, a positive sign for ASML. Most notably, TSMC revealed their plans to boost their capital expenditures from $30 billion in 2024 to around $40 billion in 2025. This significant investment will fund the acquisition of new equipment, keeping TSMC's production leading-edge.
The expected rise in TSMC's capex reveals promising opportunities in sectors like 5G, artificial intelligence (AI), and high-performance computing. ASML isn't likely to pocket every penny but will certainly receive a considerable portion. More importantly, TSMC's bullish outlook underlines the pivotal role of ASML's state-of-the-art EUV equipment in TSMC's future and the chipmaking sector at large.
TSMC's projected sales growth of AI accelerators is particularly noteworthy. This growth is expected to double in 2025, following a 2024 increase. ASML, with its advanced lithography machines and metrology tools, seems primed to rebound from its previous volatility.
Sources suggest that ASML's strategic partnership with TSMC is essential to its market dominance. TSMC's input into ASML's research and development efforts will guarantee the integration of ASML's systems into TSMC's production processes. Additionally, the increasing demand for advanced semiconductor manufacturing equipment, driven by AI infrastructure investments, suggests that ASML's High-NA EUV systems will be vital for producing the chips required for AI, 5G, and high-performance computing applications.
With this robust growth outlook in the AI sector, ASML's revenue is projected to reach €44 billion to €60 billion by 2030, with a gross margin of 56% to 60%. The company's unwavering commitment to research and development, including its cutting-edge high-NA EUV systems, will enable it to harness AI opportunities and drive substantial revenue and profit growth.
However, geopolitical risks and market cyclicality pose challenges. Nevertheless, ASML's diversified revenue streams and strategic initiatives effectively mitigate these risks, positioning the company for continued success. The company's position remains contingent on the widespread adoption of its High-NA EUV systems, which are critical for producing advanced chips required by TSMC and other prominent chipmakers.
In light of TSMC's plans to increase their capital expenditures from $30 billion to $40 billion in 2025, potential investors might consider this as an excellent opportunity for investing in ASML's stock due to the company's significant role in providing TSMC with state-of-the-art EUV equipment. As ASML benefits financially from TSMC's investment in new equipment, the company's financial stability and growth prospects may also improve.