Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) temporarily suspends the purchase of ASML Holding NV ADR (ASML.US) lithography machines. The consideration behind this decision: Cost reduction or concerns about AI demand?

According to reports, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) has postponed the purchase of ASML Holding NV ADR's new high numerical aperture extreme ultraviolet lithography machine (high-NA EUV) due to high prices. Some analysts believe that this move by Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR is expected to increase profit margins, but there are also opinions that behind this decision lies concerns about the long-term development prospects of artificial intelligence. Seeking Alpha analyst Julia Ostian commented on Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, saying, "The company's impressive performance and profit margins every quarter stem from its willingness and ability to maintain efficient operations. If Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR decides to squeeze as much profit as possible from existing EUV equipment while deploying new technology, its profit margin will be higher. However, on the other hand, this also means multiple exposures, meaning they need to send wafers into the lithography machine multiple times for exposure, and if demand is high, repeated processes can easily lead to production redundancies and even bottlenecks." ASML Holding NV ADR's latest high-NA EUV lithography machine is priced at $400 million each, roughly double the cost of older models. It is reported that Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR plans to delay purchasing such new equipment until 2029. At the same time, Ostian believes that even if Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR delays purchasing new generation equipment, it will not deal a fatal blow to the Dutch lithography giant ASML Holding NV ADR. She pointed out, "The impact of this news on ASML Holding NV ADR is limited because the company effectively holds a monopoly position in this field, and demand from companies such as Intel Corporation (INTC.US), Samsung, and SK Hynix is all increasing. However, this will affect Wall Street analysts' forecasts. In the next two years, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR has no plans for A13, N2U advanced process mass production. During this period, the company can reassess the economic impact behind this decision, so I believe this bad news should not be reflected in the stock price too hastily." Meanwhile, Seeking Alpha analyst Sandeep G. Rao suggests that Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's decision to postpone procurement may be related to the uncertainty in the long-term development momentum of artificial intelligence. Rao said, "Currently, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's production capacity is almost at full capacity, its industry position is stable, and it is highly likely to continue to receive favorable financing conditions. Therefore, the decision of Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR to postpone equipment procurement may be more related to the overall operating environment rather than equipment costs. The United States is arguably the world's largest artificial intelligence market. By 2026, approximately 45% of data center projects in the United States have been delayed or canceled due to strong public opposition and ongoing questioning of the demand and actual application scale of artificial intelligence. If chip demand collapses completely, supply contracts will be reduced accordingly, and the cash flow impact of these brand new equipment specialized for artificial intelligence wafer design will become a long-term burden on the company." Rao added, "Overall, this seems to send a very clear signal to investors enthusiastic about speculating on artificial intelligence: be cautious and collect more relevant information."