ASML Warned You, TSM Confirmed It

"The beats will grab headlines, but the real story this season is pricing power. When the top of the chip supply chain can lift prices, and its biggest customer follows suit, and does the same, its proof demand isn’t just strong, it’s built to last. For traders, the edge comes from seeing the full picture of what’s driving the complex, not just reacting to the print. "

Bilal Little, Global ETF Strategist at Direxion

Semiconductor earnings season kicked off with ASML Holding N.V. (Ticker: ASML). ASML makes the extreme ultraviolet lithography machines (EUV) that print the most advanced chips on earth. Nobody else does. When the top of the chain reports first, its order book is the demand forecast for everyone below it.

Upstream of Everything

The quarter was strong. Second-quarter sales came in around $10.6 billion, past the $10.28 billion Wall Street wanted, and earnings beat the $7.98 a share analysts had penciled in.^1,2 ASML raised its full-year outlook for the second time this year and set a current-quarter target well above the street.

ASML's EUV lines are close to sold out through 2027, and management said it now has room to charge more, with those talks already underway.³ A monopoly supplier with a sold-out book and a two-year backlog can name its price. ASML just said it plans to. The stock jumped over 7% at the open and gave most of it back to close 3.4% higher. A beat that size was expected. The pricing-power shift is the newer and bigger story, and it barely registered.

Pricing Power, All the Way Down

A day later, Taiwan Semiconductor (Ticker: TSM) confirmed the demand. The world's largest chipmaker posted record revenue of $40.2 billion, up 33.7% from a year ago, with net income up 77.4% and earnings of $4.31 a share against the $3.83 consensus.4 It pushed its full-year growth outlook from above 30% to slightly above 40% and raised its 2026 capital budget to a range of $60 billion to $64 billion, citing stronger demand and higher equipment prices.⁴ Higher equipment prices. That is ASML's warning from a day earlier, now sitting in a customer's budget.

TSMC is reportedly fighting ASML on the specific increases, even while it raises its own wafer prices on the chips it builds for the biggest names in AI.⁵ Everyone in the chain is pushing price at once. TSMC is haggling with its supplier and squeezing its own customers in the same quarter. Pricing power that runs the full length of the chain is rarer, and better for margins across the complex, than one more demand beat.

The market did not love it. TSMC closed flat, then fell 1.55% after hours, hung up on the heavier spending and a guided margin dip next quarter. Capex that big should have to prove itself. But leaning on the cost while underrating the pricing power gets the emphasis backwards.

Two of the season's most important reports are in, and they say the same thing. Demand for AI silicon is still running hotter than the industry can build, and the pricing power that comes with a shortage now runs from the equipment makers down to the foundries. The stocks barely moved because the beats were the easy part to see. The harder and more durable read is who gets to raise prices, and that just tilted toward the whole chain. However you trade the semis from here, that is the shift to watch.