To The Moon

Taiwan Semiconductor Manufacturing Co. ( $Taiwan Semiconductor Manufacturing(TSM)$ ) has set the semiconductor world ablaze with a Q2 2025 earnings beat, reporting a 61% profit surge to $8.9 billion and revenue of $20.8 billion, up 39% year-over-year, on July 16, 2025. The company’s bullish Q3 guidance of $31.8-$33 billion, a massive leap from Q3 2024’s $23.5 billion, underscores the unrelenting demand for AI chips. TSMC’s stock soared 4% in overnight trading to $185.50, hitting a 52-week high and leading a chip sector rebound. In contrast, ASML’s strong Q2 results were overshadowed by a cautious 2026 outlook, triggering a 10% stock drop to $860. Can TSMC’s momentum drive the chip sector higher, or will ASML’s warning signal headwinds? This report dives into TSMC’s triumph, ASML’s stumble, and strategic investment approaches to capitalize on the chip sector’s potential while managing risks.

TSMC’s Q2 2025: A Stellar Performance

TSMC’s Q2 earnings, released on July 16, 2025, showcased its dominance in the AI-driven semiconductor market:

• Revenue: $20.8 billion, up 39% year-over-year, beating estimates of $20.5 billion, driven by demand for 3nm and 5nm chips.

• Net Profit: $8.9 billion, up 61% year-over-year, surpassing expectations of $8.5 billion.

• EPS: $2.37, beating the consensus estimate of $2.30, reflecting strong pricing power.

• Advanced Nodes: 3nm chips contributed 22% of revenue, 5nm chips 36%, totaling 58% of Q2 revenue, up from 50% in Q1 2025.

• Q3 Guidance: $31.8-$33 billion, a 35-40% increase from Q3 2024’s $23.5 billion, signaling robust AI demand.

• Capital Expenditure: $38-$42 billion planned for 2025, up from $29.8 billion in 2024, to expand CoWoS packaging and 2nm production.

The earnings beat reflects TSMC’s critical role in producing chips for AI leaders like Nvidia, AMD, and Apple, with its CoWoS packaging capacity set to double in 2025. Social media sentiment on X is electric, with users calling TSMC “the AI chip king” and predicting a run to $200-$210 by Q4.

ASML’s Q2 2025: Strong Beat, Cautious Outlook

ASML, the leading supplier of photolithography equipment for chip manufacturing, reported robust Q2 results but faced a sell-off due to cautious guidance:

• Revenue: €7.7 billion, at the upper end of guidance, beating estimates of €7.5 billion, driven by EUV system sales.

• Net Profit: €2.3 billion, exceeding expectations, with a 53.7% gross margin due to high-margin upgrades.

• Net Bookings: €5.5 billion, with €2.3 billion from EUV systems, reflecting demand from TSMC and Intel.

• Guidance: Q3 sales projected at €7.4-$7.9 billion, missing estimates of €8.3 billion, with a 50-52% gross margin. Management warned of potential 2026 growth stagnation due to tariff risks and demand cycles.

ASML’s stock, initially up 2%, plunged 10% to $860 after the 2026 warning, reflecting investor concerns over U.S. tariffs (30% on EU/Mexico, 35% on Canada, effective August 1) and equipment demand slowdowns. X users noted “ASML’s AI strength is real, but tariffs are a killer,” predicting a dip to $800-$850.

Can TSMC Lead a Chip Sector Rebound?

TSMC’s Leadership

TSMC’s Q2 beat and bullish Q3 guidance signal sustained AI-driven demand, positioning it to lead a chip sector rebound:

• AI Chip Dominance: TSMC produces 90% of advanced AI chips, with 3nm and 5nm nodes driving 58% of revenue. Its partnerships with Nvidia (H200, Blackwell) and AMD (MI308) ensure growth.

• Revenue Growth: Full-year 2025 guidance raised to $114 billion from $87.9 billion, implying 30% growth, with Q3 revenue up 35-40% YoY.

• Market Impact: TSMC’s 4% stock surge to $185.50 lifted peers like Nvidia (up 2% to $167), AMD (up 3% to $185.50), and the iShares Semiconductor ETF (SOXX, up 2% to $230).

Chip Sector Outlook

TSMC’s performance could catalyze gains across the chip sector:

• Nvidia ( $NVIDIA(NVDA)$ ): Reliant on TSMC for AI GPUs, Nvidia’s $4 trillion market cap and 171% YTD gain could see further upside to $190-$200 if TSMC’s demand holds.

• AMD ( $Advanced Micro Devices(AMD)$ ): Up 55% YTD to $185.50, AMD’s MI308 sales to China and AI accelerators benefit from TSMC’s foundry strength, targeting $200-$210.

• SOXX ETF: Up 28% YTD to $230, the ETF offers diversified exposure to chipmakers, targeting $260 if AI demand persists.

• ASML (ASML): Despite its 10% drop, ASML’s Q2 beat and TSMC’s capex plans suggest a recovery to $1,000 if tariff fears ease.

Risks to Consider

• Tariff Headwinds: U.S. tariffs could raise costs for TSMC’s clients, with a potential 5-10% S&P 500 pullback to 5,800-6,000 impacting chip stocks.

• Competition: Samsung’s 3nm yield improvements and Intel’s $20 billion Ohio fab expansion challenge TSMC’s 90%+ AI foundry share.

• Valuation Concerns: TSMC’s 25x forward P/E and ASML’s 30x P/E leave little room for error if earnings or guidance disappoint.

• Geopolitical Tensions: The Israel-Iran conflict (oil at $75/barrel) and U.S.-China trade risks could trigger volatility.

Can TSMC Hit $200-$210?

• Technical Analysis: TSMC’s 52-week range is $84.02-$185.50, with resistance at $190-$200. Support at $170-$180 aligns with the 50-day moving average. RSI at 65 suggests room for upside.

• Analyst Targets: Median target of $168.50, with highs at $200 (Morgan Stanley) and lows at $120 (Barclays). Goldman Sachs raised to $195, implying 5% upside.

• Upside Potential: A 7.8-13% gain to $200-$210 is achievable by year-end if Q3 earnings (October 2025) beat and AI demand persists.

• Downside Risk: A tariff-driven pullback could test $170-$180, with a deeper drop to $150-$160 if catalysts falter.

TSMC’s momentum makes it the chip sector’s leader, with potential to drive a broader rebound if AI demand and tariff resolutions align.

Trading and Investment Strategies

Short-Term Plays

• Buy TSMC on Dip: Enter at $170-$180, target $200-$210, stop at $165. A 7.8-13% gain if Q3 earnings beat or AI demand surges.

• Buy SOXX ETF: Grab at $220-$230, target $260, stop at $200. A 13-18% gain on chip sector momentum.

• Options Straddle: Buy $185.50 calls/puts on TSMC or $230 calls/puts on SOXX for earnings or tariff volatility.

Long-Term Investments

• Hold TSMC: Buy at $170-$180, target $220-$250 over 12 months, for 18-39% upside with AI growth.

• Hold Nvidia: Buy at $150-$155, target $190-$200, for 18-27% upside with TSMC’s AI tailwinds.

• Diversify with Chip ETF (SMH): Buy at $150, target $170, stop at $140, for broad sector exposure.

Hedge Strategies

• VIXY ETF: Buy at $15, target $18, stop at $13, to hedge against tariff or earnings volatility.

• SPY ETF Puts: Use puts at $614 to protect against a 5-10% S&P 500 pullback.

• Gold ETF (GLD): Buy at $200, target $220, stop at $190, as a safe-haven hedge.

My Trading Plan

I’m cautiously bullish on TSMC, seeing $200-$210 as achievable by year-end 2025, driven by its Q2 beat and AI momentum. I’ll buy TSMC at $170-$180, targeting $200-$210, with a $165 stop, and SOXX at $220-$230, targeting $260, with a $200 stop, for chip sector exposure. For diversification, I’ll add NVDA at $150-$155, targeting $190, with a $140 stop. I’m hedging with VIXY at $15, targeting $18, and keeping 20% cash to seize dips if tariffs (30% on EU/Mexico, 35% on Canada) or geopolitical tensions (Israel-Iran conflict) escalate. I’ll monitor Q3 earnings, tariff negotiations, and AI spending trends for cues.

Key Metrics

The Bigger Picture

TSMC’s Q2 2025 earnings beat, with a 61% profit surge to $8.9 billion and $20.8 billion in revenue, underscores its leadership in the AI chip market, with 3nm and 5nm chips driving 58% of revenue. Its bullish Q3 guidance of $31.8-$33 billion signals sustained AI demand, potentially sparking a chip sector rebound. ASML’s 10% drop to $860, despite a Q2 beat, reflects caution over 2026 growth, but its dip to $800-$850 offers a buying opportunity. The chip sector, including Nvidia, AMD, and SOXX, could rally if TSMC’s momentum holds, but tariff risks (30% on EU/Mexico, 35% on Canada) and competition from Samsung and Intel pose challenges. Investors should buy TSMC and SOXX on dips for long-term upside, use options for volatility plays, and hedge with VIXY or GLD to manage risks. The chip sector’s rally is heating up—pick your winners and trade smart.

Can TSMC lead a chip sector rebound? Are you buying TSMC, ASML, or SOXX? Share your strategy below! 🎁

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