Better Artificial Intelligence Stock: ASML vs. TSMC

There are many good artificial intelligence (AI) stocks available to invest in right now, but it can be difficult to know which one is the best to invest in over the long term. Investors seeking top AI stocks have likely encountered ASML Holdings (NASDAQ: ASML) and Taiwan Semiconductor Manufacturing (NYSE: TSM), two of the leading companies in the AI infrastructure sector.

With both companies offering a unique angle in the AI market, it's worth asking which could be the better artificial intelligence stock to buy right now? Here's the case for both and why Taiwan Semiconductor, also referred to as TSMC, might have the slight edge over ASML.

Image source: Getty Images.

Why ASML should be on your short list

ASML is a leading AI infrastructure company that manufactures the machinery used to produce semiconductors. ASML has been the leader in this space for years and currently holds 90% of the lithography market share. The latest estimates put ASML's rivals at least a decade behind the company's tech.

If that weren't enough to pique your interest, consider that ASML not only sells its expensive machinery to large tech companies -- TSMC included -- it also generates recurring revenue from its equipment sales through service contracts. In the first nine months of 2025, ASML's service revenue was up 39% to 6 billion euros ($7 billion). And with ASML's equipment often being in service for several decades, there are plenty of years of service revenue ahead.

With ASML's customers ramping up spending, the company's sales and earnings are increasing. Revenue jumped 21% in the first nine months of this year to 23 billion euros ($27 billion), and diluted earnings per share popped 40% to $17.38 per share. Add to all that the fact that ASML enjoys gross margins in the low 50% range, and you've got a very profitable AI company with a bright future ahead.

Why TSMC is a top AI stock

If you've been following AI stocks closely, TSMC is probably on your radar (or already in your portfolio). The company is the leading manufacturer of advanced processors, taking an estimated 90% of the market.

The primary difference between the company and ASML is that TSMC manufactures AI processors, whereas ASML produces the equipment used to create these processors. Business is booming for TSMC right now as tech giants invest heavily in new data centers. This spending spree led to TSMC's sales doubling in the third quarter to $33 billion and earnings jumping 39% to $2.92 per American depositary receipt (ADR).

No other company is as good at manufacturing advanced processors as Taiwan Semiconductor, which should keep the company well ahead of competitors for years to come. Moreover, if AI infrastructure spending increases by up to $4 trillion over the next five years -- as Nvidia's management believes it will -- then there is still plenty of growth ahead for TSMC.

The company also has a lead over its rivals that won't be closed any time soon. TSMC continually invests in its robust R&D program, creating the next line of advanced processors, and Morningstar research says TSMC's competitive advantages could "persist up to two decades."

Why TSMC edges out ASML for win

Owning shares of ASML and TSMC would likely be a good move for your long-term investment strategy, but since this is a match-up and I have to pick just one, I think TSMC has the slight edge because its shares are cheaper.

Taiwan Semiconductor's shares currently have a price-to-earnings (P/E) ratio of just 26, which is below the tech sector's average P/E ratio of 47 and lower than ASML's P/E of 36. That said, you probably can't go wrong buying both these top artificial intelligence stocks and holding them for years to come.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.