TSM and ASML reported very different quarters, casting mixed messages on the semiconductor sector. ASML reduced its 2025 revenue and gross margin outlook, with China normalizing to 20% of revenue, down dramatically from 49% YTD, plus weakness being seen basically everywhere outside of AI. TSM reported strong demand and increased revenue from the leading edge nodes (3nm and 5nm), a direct positive read on AI, i.e., NVDA.
ASML net bookings dropped 53% sequentially to Euro 2.6 billion (vs. consensus Euro 5.6 billion) with notable weakness in logic as it declined from 73% to 46% of the order book. Logic weakness was seen due to foundry pushouts, the China normalization, and non-AI recovery being more muted.
TSM surprised investors with the upside as Q3 Gross Margins far exceeded even the high end of guidance, coming in at 57.8% vs. consensus of 55% and guided Q4 to 58%. The GM upside can mainly be attributed to improved utilization rates on the 3nm and 5 nm nodes and cost reduction efforts paying off.
When asked about AI strength, TSM management continued to stress that the AI build is in the early innings and demand remains robust there. TSM increased their expectations for AI to represent mid-teens vs. low-teens percentage of revenue in 2024- a clear positive sign for NVDA.
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