Do you know that your complete chip trade depends on one single firm? And the actual kicker? It’s not Chinese language or American. Crucial semiconductor producer is from the Netherlands, and it’s known as ASML. Proper now, it’s buying and selling at ranges final seen within the 2022 bear market. On this article, we’ll dive into why this monopolistic big may very well be the actual AI winner of 2025.
With one of many strongest MOATs on the earth, ASML is a key enabler of the AI revolution
AI is changing into a matter of nationwide safety, necessitating home chip manufacturing and driving demand for ASML
Learn on to seek out out if ASML is a match to your portfolio…
The AI revolution is reshaping how we work together with the best invention earlier than it — the pc. Three years in the past, AI felt like a dangerous guess. Right this moment, the better danger lies in overlooking it. And that applies past investing.
Though market sentiment across the AI revolution has cooled down in current weeks, information reveals that the AI trade has solely gotten hotter. Non-public investments are on monitor, governments are pouring tens of billions into sovereign chip and AI infrastructure, and AI fashions are more and more extra clever and helpful.
However making AI chips, that are fabricated from transistors 30,000 instances smaller than a human hair, is probably the most superior manufacturing course of on earth. That’s the reason just one firm on the earth can produce the unbelievable machines that do it. ASML has constructed a monopoly because of its huge technological benefit.
Discover ASML inventory on eToro!
Their flagship EUV lithography machines use an excellent exact laser to attract circuits onto a chip so tiny, it’s like sketching a complete metropolis on a grain of rice. The method includes mirrors so clean that if scaled to the dimensions of the moon, their imperfections could be smaller than a blade of grass. That’s as a result of a standard mirror would take up the laser’s miniature lightwaves, which should hit a droplet of tin – half the width of a human hair, shifting at 200 meters per second – useless heart, 50,000 instances a second. However we’re getting too technical right here. In order for you extra particulars on ASML’s machines, I like to recommend studying their annual report right here.
However why would ASML be the AI winner of 2025?
AI is not simply chatbots and picture turbines. With rising capabilities in navy and cybersecurity functions, AI is changing into a matter of nationwide curiosity. It’s clearly seen within the semiconductor commerce between the US and China. The US has lately blocked Nvidia from promoting the H20 – its “dumbed-down” model of its Hopper chip – to China, citing safety dangers. In the meantime, China has put the burden of its authorities behind sovereign AI.
As a result of the event of AI is so fast, no one is aware of what capabilities may be found. It’s more and more clear that we’re in an AI arms race, and everyone seems to be attempting to get forward. As a result of many main AI fashions are open supply, governments are attempting to focus on the step earlier than that, the manufacturing course of. In case your rival has worse know-how, they will’t get the very best AI mannequin. A minimum of in idea.
However semiconductor provide chains are among the many most complicated on the earth. A chip may be designed within the U.S., manufactured in Taiwan, packaged in Vietnam, examined in China, and eventually shipped again to the U.S. That’s the reason growing home chip manufacturing capabilities is changing into a strategic goal for the world’s main economies, that are realising that their interconnection is changing into a vulnerability.
And what’s step one to construct home modern chip foundries? That’s proper, shopping for lithography machines from ASML. No different firm on the earth is competing on this area. It’s simply too complicated and costly.
Let’s check out ASML’s enterprise mannequin to see the way it can leverage this example.
ASML’s Enterprise Breakdown & SWOT Evaluation
Because of the nature of ASML’s enterprise, buyers will need to have a deep understanding of its machines. ASML truly manufactures machines starting from the cutting-edge high-NA EUV to easier applied sciences the place ASML competes with Nikon and Canon. The 2 important classes, EUV and DUV, by which ASML holds a monopoly, made up 86% of 2024 income. That’s why we’re giving them particular consideration on this evaluation. These are additionally its important progress drivers.
EUV: The Future Of Chipmaking
Something under 13.5 nm requires an EUV machine to fabricate. These embrace chips just like the Snapdragon 8, Apple M3, Tesla Dojo D1 or Nvidia H100.
A typical semiconductor manufacturing plant, or “fab”, incorporates between 10 – 30 of those machines. So with each deliberate fab, you possibly can anticipate that quantity of orders for ASML.
These are usually not common machines both. 150 ASML specialists are wanted to assemble the modular design, which is then shipped to prospects, the place last meeting can take as much as six months, 120 engineers, and over 20 vans and three cargo planes. So It’s not like you possibly can decide these up and transfer them to a different facility. However after getting them, they will work for as much as 30 years.
These machines value between 200 – 250 million {dollars} a pop, with cutting-edge fashions costing as much as $ 400 million. Their upkeep prices additionally run into the tens of tens of millions yearly. So in case you think about a brand new fab in Arizona for instance, with let’s imagine 10 EUV machines, that’s over 2,5 billion {dollars} of income for ASML. For a corporation that did almost 30 billion $ in income in 2024, that’s a reasonably large ticket.
Due to the excessive prices, solely a handful of corporations can afford them. TSMC, Samsung and Intel at the moment make up the vast majority of ASML’s demand. This makes it simpler to venture future demand by monitoring enlargement plans of those three corporations.
TSMC is increasing its manufacturing capabilities with three fabs in Arizona, one in Kumamoto, Japan, one in Taiwan, and one in Dresden, Germany. Intel is increasing its US fab footprint too, with two modern fabs below development in Arizona, two in Ohio and two in Magdeburg, Germany. Samsung is constructing two fabs in Texas and increasing capability in South Korea.
Spend money on chip leaders with eToro’s Chip-Tech Sensible Portfolio!
As we are able to see, demand for EUV is prone to keep elevated within the coming years, with computing necessities prompting fabs to pursue smaller, 2nm know-how utilizing high-NA EUV, ASML’s newest innovation. Intel was the primary in line to order these machines.
It’s essential to notice that ASML shouldn’t be delivery EUV to China. Right here, we’re as soon as once more coming again to politics, as a result of ASML is going through export restrictions. The US has been urgent ASML to not promote to China since 2018, additional proving the delicate nature of this know-how. Nevertheless, ASML does enterprise with China of their much less superior DUV phase. Let’s check out that.
DUV: Outdated However Not Out of date (get the Terminator pun?)
DUV lithography is much less superior, however nonetheless crucial and extensively utilized in each older nodes, starting from 28 – 90nm, and fewer crucial layers of vanguard nodes, serving as a complement to EUV. DUV is used for automotive chips, built-in circuits, RF chips, show chips, and others.
Right here, the listing of shoppers is for much longer, as they’re utilized in a variety of units. The most important ones embrace TSMC, Samsung, SK Hynix, Micron, Intel, and plenty of Chinese language companies.
Key progress drivers for these machines embrace AI, self-driving, IoT & good units, and HBM and different reminiscence. It’s essential to notice that each EUV chip requires DUV as nicely. Fabs include round double the quantity of DUV machines in comparison with EUV.
DUV are easier to fabricate and assemble as nicely, “solely” taking 3-5 months to assemble. The prices of DUV instruments vary from 10 million {dollars} for the best ones used for ICs to 80 million for superior instruments used to complement EUV in modern chip manufacturing. Upkeep prices attain 4-6 million $ per software.
Now that we all know what they do, let’s take a look at the SWOT evaluation.
Strengths: aggressive benefit (monopoly in >80% of income), huge up-front prices for opponents, essential provider (chip fabs have to make use of ASML machines), strategic know-how (international locations are more and more attempting to develop home chip manufacturing capabilities, boosting demand), huge order backlog (ASML has sufficient orders for greater than a 12 months forward)
Weaknesses: sophisticated provide chain (typically with a single provider on the earth), publicity to tariffs (EU firm delivery to USA), unstable demand (ASML’s machines are a giant, one time funding, so demand can waiver)
Alternatives: AI (modern AI chips depend on EUV know-how, and demand is rising), Automotive (Ongoing electrification and FSD requires many superior chips for automobiles), authorities assist (governments are subsidizing home chip producers)
Threats: AI mannequin developments (extra environment friendly fashions may doubtlessly cut back demand for extra highly effective chips), commerce warfare (tariffs may damage ASML’s provide chain and US may stress it to cease DUV enterprise with China)
Do you need to be taught extra about ASML? Try Neža Molk’s evaluation!
ASML’s Newest Quarterly Name Helps Development Thesis
In ASML’s newest quarterly name, administration stated some very engaging issues supporting my progress thesis.
First, tariffs haven’t affected AI chip demand, and are doubtless not going to have an effect on ASML’s commerce with the US, as its know-how is vital to the administration’s goal of increasing the US’s semiconductor manufacturing capabilities.
Particularly, CEO Christophe Fouquet famous that: “the announcement of tariffs haven’t modified the enterprise dialog we’ve with our prospects” and CFO Roger Dassen added that ASML expects that: “the lion’s share of the tariff burden needs to be borne by the following component within the worth chain,” hinting at how semiconductor fabs will most likely bear probably the most tariff impression as ASML has important bargaining energy because of its distinctive place.
However the irreplaceability of its machines offers producers a robust argument to foyer in opposition to tariffs on ASML’s machines. ASML acknowledged this on the earnings name, saying that it “may be the rationale why semiconductors at the moment are exempt from tariffs,” including that this concern “is being acknowledged by the U.S. administration.”
AI continues to be driving robust demand throughout the entire provide chain. In abstract, administration stated that main investments are already dedicated by corporations decided to compete within the AI race. Based mostly on buyer conversations, ASML sees 2025 and 2026 as strong progress years fueled by this momentum, with important chip manufacturing investments already locked in and future commitments wanting very strong.
One other essential matter is China, as a result of it’s anticipated to make up 25% of 2025 gross sales. ASML stated that Chinese language demand could be very robust, notably because of the enlargement of the electrical automobile trade, but additionally AI and mainstream chips. Actually, Chinese language demand is best than anticipated a number of months in the past.
ASML additionally confirmed that the enlargement of sovereign chip manufacturing is anticipated to drive demand for its machines, saying this development will drive up demand throughout your complete worth chain.
Is ASML Inventory Undervalued?
Right here comes the juicy half. Regardless of all of those optimistic components talked about above, ASML has turn out to be a casualty of investor pessimism. Its shares are buying and selling at critically depressed ranges. relative metrics, it’s clear that ASML is buying and selling far under its imply over the previous ten years, suggesting a possible 20% upside.
The undervaluation turns into even clearer when wanting on the valuation metrics since ChatGPT was launched, which began an enormous wave of investments into chip know-how.
One other chart I like to take a look at is the worth at max, median, and max multiples. As you possibly can see, the shares at the moment are buying and selling at an alarmingly low value, presumably creating an enormous alternative.
Wanting on the inventory from a technical perspective, we see a clearly outlined resistance degree at across the 610 $ mark. If we handle to interrupt that subsequent week, we may see the inventory rally 10% till it meets the second main resistance degree at 670$. Breaking the EMA’s alongside the way in which may present momentum assist.
Is ASML Inventory A Purchase?
The market is usually environment friendly more often than not. There are two methods a inventory turns into undervalued. Both the market costs in too little upside potential, or it costs in an excessive amount of draw back danger. In ASML’s case, it’s the latter.
Discover ASML inventory on eToro!
Tariffs, AI mannequin enhancements, and total souring sentiment have all weighed on ASML’s shares. Nevertheless, I imagine that the market is critically mispricing the impact of this example on ASML. The corporate has a number of tailwinds going for it, making it unreasonably priced on the present ranges. Let’s take a look at three doable outcomes:
Bull case: Trump’s tariff deal spares ASML’s machines, recognizing their crucial significance within the semiconductor trade. AI demand stays on monitor, permitting ASML to execute on its progress technique. Fabs proceed to broaden within the US because of authorities incentives and demand alerts. On this case, we may see not less than a 30% upside within the medium time period.
Base case: Trump’s tariffs hit ASML, which is ready to move down the prices to prospects because of its important bargaining energy. Increased costs stifle fab enlargement within the US, doubtlessly making 2025 one other transition 12 months for ASML till the mud settles. On this case, ASML nonetheless has 10% upside potential because of already deliberate enlargement offers.
Bear case: Tariffs plunge the US right into a deep recession, slowing AI demand and hurting ASML’s prospects. ASML shouldn’t be capable of maneuver out of this, and progress will get damage. Even then, the inventory has restricted draw back at this value, as the corporate is anticipating to double by 2030.
Did you discover this evaluation useful? Share it with others on eToro!
This communication is for data and training functions solely and shouldn’t be taken as funding recommendation, a private suggestion, or a proposal of, or solicitation to purchase or promote, any monetary devices. This materials has been ready with out bearing in mind any explicit recipient’s funding aims or monetary scenario and has not been ready in accordance with the authorized and regulatory necessities to advertise unbiased analysis. Any references to previous or future efficiency of a monetary instrument, index or a packaged funding product are usually not, and shouldn’t be taken as, a dependable indicator of future outcomes. eToro makes no illustration and assumes no legal responsibility as to the accuracy or completeness of the content material of this publication.
