Taiwan Semiconductor Manufacturing Company (TSM) leads chip stocks higher after reporting better-than-expected third quarter results and raising its 2025 sales forecast. The earnings beat seemed to reassure investors' confidence in artificial intelligence (AI) after ASML Holding (ASML) trimmed its guidance, sending semiconductor stocks lower.

TECHnalysis Research president and chief analyst Bob O'Donnell joins Seana Smith and Brad Smith on Morning Brief to discuss his view that TSMC’s earnings beat is more indicative of the AI chip market than ASML’s weakness.

O’Donnell tells Yahoo Finance that ASML’s outlook cut “increasingly is going to look like this unusual blip for the semiconductor industry in general.” He explains that issues in the China region and challenges with Intel (INTC) and Samsung (005930.KS) contributed to ASML trimming its guidance, emphasizing that “it's not an overall industry thing.”

“TSMC is [a] much better bellwether of where things are going,” the analyst says. “Bottom line, we saw not only the huge beat and then the raise [but also] the discussion even into next year,” indicating demand strength that is expected to continue being strong. “Clearly, I think the people are having a hard time accepting it, but look, this AI thing is real. The demand is real. It's continuing. And there's a lot of opportunity moving forward.”

He adds, "TSMC is just extraordinarily well-positioned, and that's why there's so much focus on them because what happens there really drives the vast majority, especially, of the high-end semiconductor market that we're seeing for AI.”

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This post was written by Naomi Buchanan.