The competition in the semiconductor industry is intensifying once more, but it's not centered around chipmakers. Two of the industry’s most critical behind-the-scenes players, ASML Holding and Applied Materials, are drawing sharp investor attention.
Both companies equip the world’s largest chipmakers with tools essential to fabrication. But diverging strategies and outlooks suggest a shifting dynamic at the top.
ASML: A Technological Powerhouse Facing New Pressures
ASML Holding is the uncontested leader in lithography systems, most notably in extreme ultraviolet (EUV) technology. This cutting-edge process is indispensable for producing high-performance chips used in AI, smartphones, and advanced computing.
In Q2 2025, ASML reported impressive numbers: a 23% jump in revenue and a 47% increase in earnings per share. Yet, the mood turned cautious during its earnings call.
Executives walked back previous optimism about growth in 2026, saying they “cannot confirm growth” due to customer hesitancy. Analysts see this as a sign that demand for EUV systems, while still strong, may not accelerate as quickly as once hoped.
Trade policy is another concern. The company acknowledged that ongoing U.S.-China tariff discussions, including the Section 232 tariff review, are affecting purchasing timelines. These delays could impact order volumes late in 2025 and into 2026.
ASML’s third-quarter guidance disappointed many. It forecasts revenue between €7.4 billion and €7.9 billion, marking a slowdown compared to prior quarters. Its gross margin is also expected to decline to 50-52%, partly due to increased sales of lower-margin high-NA systems.
Did you know?
ASML is the only company in the world that makes EUV lithography machines, each costing over $200 million.
Applied Materials: Steady Execution and Broader Reach
Unlike ASML’s focus on lithography, Applied Materials (AMAT) spans a broader range of chipmaking processes: deposition, etching, and metrology. This versatility offers the company insulation from specific demand swings and positions it to capture growth across the entire chip supply chain.
Applied is also benefiting from booming AI demand. Its tools are essential in building next-gen chips, including those using gate-all-around (GAA) transistor designs and high-bandwidth memory (HBM) structures.
In fiscal 2024, AMAT generated over $2.5 billion from advanced semiconductor nodes, a figure projected to double in fiscal 2025. This reflects accelerating adoption of advanced chip architectures by major foundries and AI-centric players.
Financially, AMAT’s Q2 2025 results were solid. Revenue rose 6.8%, and non-GAAP earnings per share climbed 14.4%. Its Q3 guidance projects continued momentum with a 6.2% rise in revenue and a 10.8% jump in earnings.
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Analysts Divided, But Trends Are Emerging
While both companies remain foundational to global chip production, analysts are beginning to distinguish near-term winners. Applied Materials appears better positioned to benefit from current market trends, especially as chipmakers diversify into new node technologies.
Meanwhile, ASML’s premium systems remain irreplaceable, but growth expectations are being recalibrated. Investors may need to look beyond 2026 to see a return to aggressive EUV-driven expansion.
Investor sentiment is reflecting these dynamics. Investors increasingly perceive Applied Materials as the more stable option for medium-term growth, despite ASML still commanding valuation premiums for its technological edge.
Strategic Outlook: A Market in Transition
As AI, automotive, and cloud computing drive semiconductor innovation, equipment makers must adapt quickly. ASML is banking on continued EUV dominance, but short-term hurdles, both technical and geopolitical, are surfacing.
Applied Materials, in contrast, is capitalizing on diversification and process flexibility, allowing it to serve a broader swath of the semiconductor ecosystem. That adaptability could prove critical in a market defined by cycles and uncertainty.
In the battle of chip equipment giants, ASML and Applied remain indispensable. But right now, one appears to be sprinting while the other is catching its breath.
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