Taiwan Semiconductor Manufacturing Company (TSM) leads chip stocks after reporting better-than-expected third-quarter results and raising its 2025 revenue forecast. The earnings surge appeared to boost investor confidence in artificial intelligence (AI) after ASML Holding (ASML) cut its forecast, causing semiconductor stocks to fall.

Bob O'Donnell, president and principal analyst of TECHnalysis Research, joins Seana Smith and Brad Smith in Morning Brief to discuss his view that TSMC's earnings growth is more indicative of the AI ​​chip market than ASML's weakness.

O'Donnell tells Yahoo Finance that ASML's forecast cut “will increasingly look like this unusual blip for the semiconductor industry at large.” He explains that issues in the China region and challenges with Intel (INTC) and Samsung (005930.KS) have contributed to ASML cutting its guidance, emphasizing that “it's not an industry-wide issue.”

“TSMC is (a) much better indicator of where things are going,” the analyst says. “The bottom line is that we not only saw the huge increase and then the increase (but also) the discussion into next year,” which is an indication that demand is likely to remain strong. “Of course I think people have a hard time accepting it, but look, this AI thing is real. The demand is real. It goes on. And there are many possibilities for the future.”

He adds: “TSMC is just exceptionally well positioned, and that's why there's so much focus on them, because what's happening there is really driving the vast majority, particularly the high-end semiconductor market that we see for AI.”

For more expert insights and analysis on the latest market activity, read the Morning Brief here.

This post was written by Naomi Buchanan.