With Demand Set to Outstrip Supply Until at Least 2028, ASML Stock Is a Buy
Key PointsThe chip equipment specialist remains in a strong position, given its monopoly in EUV machines.
The semiconductor equipment company ASML Holding (ASML) is poised for significant growth due to its crucial role in the production of advanced chips. The Dutch firm holds a monopoly on extreme ultraviolet (EUV) lithography technology, which is essential for creating cutting-edge components used in smartphones, computers, and artificial intelligence infrastructure.
ASML's demand far exceeds its production capacity, with customers already requesting orders for 2029 and 2030. The company is exploring ways to expand its manufacturing capabilities, such as introducing newer machines that can increase wafer throughput and boost wafer output for its DUV immersion tools. ASML's Q3 earnings showed a 55% year-over-year increase in revenue to 11.7 billion euros ($13 billion), with equipment sales up 51% to 8.4 billion euros ($9.3 billion) and service revenue rising 65% to 2 billion euros ($2.2 billion).
The firm expects China to account for around 20% of its business in 2029 and beyond. Despite its premium valuation at a 29 times forward price-to-earnings (P/E) ratio, ASML's strong growth in an increasingly important market positions it as a promising long-term investment.
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