TSMC and ASML’s latest results reveal two very different ways to finance the same chip expansion. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) builds and operates fabrication plants; ASML Holding N.V. (NASDAQ:ASML) supplies the lithography equipment those factories require. The two rank second and sixth in our 10 Best AI Infrastructure Stocks to Buy for the Long Term.
Image: TSMC
The factory bill changes the comparison
TSMC’s October 15 results showed third-quarter revenue of NT$1.494 trillion and capital expenditure of NT$443.21 billion. That means 29.7% of sales went back into capital assets. Operating cash flow of NT$919.77 billion still covered that investment, leaving NT$476.56 billion after capital spending.
ASML’s October 14 report showed €11.662 billion of sales and €447.2 million spent on property, equipment and intangible assets, or 3.8% of revenue. The gap reflects business structure: ASML’s customers bear the cost of building and operating the fabs. Supplier investment also sits outside ASML’s own capital expenditure, so this compares corporate cash commitments rather than the entire manufacturing chain.
That lower direct investment burden favors ASML for investors prioritizing expansion with less company-owned fixed capital. TSMC’s counterargument is control over scarce advanced manufacturing capacity, supported by a 58.7% operating margin. Its larger investment bill creates productive capacity, provided customers keep those factories busy.
One extraordinary cash quarter needs unpacking
ASML generated €11.798 billion of operating cash flow, but €7.009 billion came from changes in assets and liabilities. Subtract that inflow and the €447.2 million investment bill and the residual is €4.341 billion. This is a diagnostic calculation, not a forecast or a complete normalized cash-flow estimate. Customer payment timing can make one quarter look exceptionally strong.
TSMC faces utilization, construction and geopolitical risks; ASML faces delayed equipment acceptance, order timing and export restrictions. Lower capital intensity does not by itself establish a cheaper stock: the price paid and sustainable earnings still determine the investment case. Our return analysis tests which growth and exit-valuation assumptions can reverse the TSMC-ASML choice.
Hedge-fund ownership in Q2 2026 rose to 249 from 234 for TSMC and to 140 from 133 for ASML. Fisher increased shares 2% and 3%, respectively. Those holdings preceded the October results. ASML’s September 30 short interest was 0.37% of float.
ASML requires much less direct capital spending per revenue dollar. TSMC currently generates enough operating cash to finance its much larger program. For a long-term investor, the deciding evidence is sustained cash after investment: ASML must maintain collections as equipment ships, while TSMC must turn new capacity into durable utilization and profit.
