The upcoming earnings reports of these tech giants could give their stock prices a nice shot in the arm.
The past six months have been solid for technology stocks, which is evident from the 31% jump in the tech-laden Nasdaq Composite during this period. As it turns out, tech stocks have outperformed the broader market, with the S&P 500 clocking 19% gains over the past six months.
The outperformance of technology stocks can be attributed to a key catalyst in the form of artificial intelligence (AI). The proliferation of this technology has led to big jumps in the business of companies selling AI-related solutions. Here’s a closer look at two such tech names that are playing a critical role in the global AI rollout, and why they are worth buying in October.
This chip giant has been crushing the market, and it can fly higher in October
Taiwan Semiconductor Manufacturing (TSM -0.09%), popularly known as TSMC, has shot up a remarkable 71% in the last six months. The Taiwan-based foundry giant has seen a nice acceleration in growth in the past couple of years, owing to the big increase in AI chip demand. That’s not surprising, as the company fabricates chips that power key AI applications, including smartphones, computers, and data centers.
TSMC’s customer base includes fabless chipmakers such as Nvidia, AMD, Broadcom, Qualcomm, MediaTek, and Marvell, along with consumer electronics giants such as Sony and Apple. Even integrated device manufacturers such as Micron and Intel use TSMC’s facilities to fabricate chips. As such, TSMC gives investors an outstanding opportunity to capitalize on the secular growth of the AI chip market.
According to market research firm TechNavio, the market for AI chips is expected to witness an incremental jump of $902 billion in revenue through 2029. This could set TSMC up for years of solid growth, which is precisely why investors should consider buying it before it soars higher in the wake of its upcoming quarterly results.
TSMC will release its Q3 results on Oct. 16. It has guided for $32.4 billion in revenue at the midpoint of its guidance range. That would be a 39% increase from the same period last year, when TSMC reported a 36% spike in its top line. However, there is a possibility of the company exceeding its own guidance range, considering that AI data centers are running short of capacity, which is likely to spur greater investment in setting up servers.
AI servers are powered by central processing units (CPUs), graphics processing units (GPUs), and custom processors, and TSMC fabricates these chips for the various chip designers outlined earlier. Moreover, consulting firm Bain & Company estimates that AI compute demand will continue to outpace supply until the end of the decade.
So, TSMC stock could get a nice shot in the arm once it releases its results in October, and it can sustain its outstanding growth levels for a long time to come, considering the long-term AI chip opportunity. Moreover, the stock is trading at an attractive 24 times forward earnings right now, giving investors an opportunity to buy it before a solid set of results send it higher.
Semiconductor equipment spending can send this tech stock higher
ASML (ASML 2.64%) will also release its third-quarter results soon, on Oct. 15. The semiconductor equipment giant has rallied an impressive 42% in the past six months. What’s worth noting is that ASML has a similar catalyst to that of TSMC — the fast-growing demand for AI chips.
While TSMC is a foundry that manufactures chips for its customers, ASML makes the machines that the former uses to fabricate those chips. So, foundries and integrated device manufacturers such as TSMC, Intel, and Micron count among ASML’s customers. Now, all these companies and others have been using ASML’s advanced machines to print cutting-edge chips that are capable of delivering healthy performance while keeping power consumption in check at the same time.
This is the reason why ASML’s growth rates have picked up impressively since last year.
Data by YCharts.
However, the company delivered cautious guidance when it released its Q2 results in July. Its revenue guidance of 7.65 billion euros for Q3 doesn’t point toward a major increase over its revenue in the same quarter last year. Management’s cautiousness stems from the potential impact of tariffs on its performance. But the good part is that the impact of tariffs on ASML’s business has been lower than expected so far, as management pointed out on the previous earnings call.
As a result, don’t be surprised to see ASML’s results exceeding its guidance in October, which could give the stock a nice boost. Moreover, the shortage of AI data center capacity pointed out earlier is another reason why this stock could be a solid long-term investment. The rising capital expenditures (capex) of tech giants, so that they can fulfill their huge backlogs, will encourage foundries and chipmakers to invest in more equipment, and that’s going to be a tailwind for ASML.
In fact, industry association SEMI estimates that advanced chipmaking capacity could see a 69% increase by 2028. ASML has a monopoly-like position in advanced chipmaking equipment, suggesting that it could sustain its improving growth rates in the long run. And as this semiconductor stock is trading at 31 times forward earnings right now, a slight discount to the tech-laden Nasdaq-100 index’s earnings multiple, it may be a good idea to buy it before its earnings are out, since it has the potential to sustain its impressive rally.
Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Apple, Intel, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Marvell Technology and recommends the following options: short November 2025 $21 puts on Intel. The Motley Fool has a disclosure policy.