Investing in artificial intelligence (AI) stocks has become a hot trend lately. The potential for substantial gains in this sector has caught the attention of both investors and consumers alike. However, amidst the flurry of excitement, long-term investors seek companies with sustainable business models capable of driving AI-driven profits for years to come. One such company leading the charge in revolutionizing industries through AI is ASML Holding.
ASML Holding (NASDAQ: ASML)
Often referred to as the most important tech company you’ve never heard of, ASML Holding (NASDAQ: ASML) is a pioneer in the semiconductor industry.
Through its cutting-edge extreme ultraviolet lithography (EUV) technology, ASML facilitates the production of the world’s most advanced semiconductors. Its clients include major players such as Samsung (LSIN: SMSN), Taiwan Semiconductor Manufacturing (NYSE: TSM), and Intel (NASDAQ: INTC). Without ASML’s equipment, the manufacturing capabilities of these industry giants would be severely limited.
ASML stock price today per share
Key highlights:
- EUV technology: ASML’s extreme ultraviolet lithography (EUV) technology is indispensable for the production of advanced semiconductors;
- Major clients: Samsung (LSIN: SMSN), Taiwan Semiconductor Manufacturing (NYSE: TSM), and Intel (NASDAQ: INTC) are among ASML’s key clients, relying on its equipment for semiconductor manufacturing;
- Technical lead: ASML’s technological superiority over competitors like Lam Research (NASDAQ: LRCX) and Applied Materials (NASDAQ: AMAT) solidifies its position as the go-to choice for chip manufacturers.
Increasing demand for AI chips
ASML is not only riding on its past successes but also capitalizing on powerful industry tailwinds. The increasing demand for AI chips has propelled the need for more ASML equipment.
Moreover, geopolitical shifts are prompting companies to diversify their manufacturing away from regions like Taiwan. With substantial government subsidies available for capacity expansion in the U.S., Europe, and Japan, ASML stands as a primary beneficiary.
ASML stock revenue
ASML Holding’s business model is fortified by sustainable revenue streams, ensuring long-term stability and growth. Key components of these revenue streams include:
- High equipment costs: ASML prices its machines at up to $400 million per unit, ensuring significant investments from clients;
- Recurring revenue: Approximately 20% of ASML’s net sales in 2023 were derived from service and field option sales, providing a stable revenue stream;
- Robust financial performance: Net sales in 2023 surged to nearly 28 billion euros ($30 billion), with net profits rising by 39% over the same period.
| Key metrics | 2022 | 2023 |
| Net sales (billion €) | ~23 | ~28 |
| Net profit (billion €) | ~5.6 | ~7.8 |
| YoY growth | ~30% | ~39% |
Investor recognition
While ASML may have been flying under the radar for some time, investors are starting to take notice of its potential. Over the past year, the semiconductor stock has seen a remarkable surge of over 35%, predominantly in 2024. Despite its price-to-earnings (P/E) ratio of 43, which might appear elevated, it aligns closely with historical averages.
ASML stock growth potential:
- Market momentum: ASML’s stock has experienced significant growth, reflecting increasing investor confidence in its future prospects;
- Reasonable valuation: Despite a seemingly high P/E ratio, ASML’s valuation is in line with its historical performance, indicating sustainable growth potential.
Conclusion: Is ASML stock a good buy?
ASML stands at the forefront of AI-driven innovation in the semiconductor industry. With its groundbreaking technology, strong client base, and favorable industry dynamics, ASML is well-positioned to continue reshaping industries for years to come.
For investors seeking exposure to the transformative power of AI, ASML Holding presents a compelling opportunity for long-term growth and profitability.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
