ASML: A Discounted No-Brainer Buy in the AI Revolution

The global AI revolution is reshaping industries, and at its core lies a silent but critical enabler: advanced semiconductor manufacturing. ASML Holding NV (ASML), the Dutch semiconductor equipment giant, sits at the apex of this transformation. Yet, despite its dominant position in extreme ultraviolet (EUV) lithography and a forward P/E ratio of 24.55–26.7x [1][2], the stock trades at a discount to its intrinsic value and industry peers. This divergence presents a compelling opportunity for investors who recognize the long-term tailwinds of AI-driven demand and ASML’s near-monopoly in a critical segment of the semiconductor supply chain.

ASML’s EUV Monopoly: The Bedrock of AI Chipmaking

ASML’s EUV lithography systems are indispensable for manufacturing advanced chips used in AI, high-performance computing, and next-generation memory technologies. The company holds a 100% market share in EUV lithography, a segment with no viable competitors [5]. Its NXE:3800E and upcoming High NA EUV systems are the only tools capable of producing chips at sub-3nm nodes, which are essential for AI accelerators and data center processors [1].

The demand for EUV systems is surging: ASML projects a 30% growth in EUV sales in 2025, driven by the need for AI chips with higher computational density [1]. This growth is underpinned by the fact that AI data centers now account for 33% of global data center capacity in 2025, a figure expected to rise to 70% by 2030 [6]. Tech giants like Microsoft and Amazon are investing $80 billion and $86 billion, respectively, in AI infrastructure by 2025, directly fueling demand for ASML’s equipment [6].

Financials and Valuation: A Discounted King

ASML’s financial performance in 2025 underscores its resilience. Q2 2025 revenue hit €7.7 billion, up 23% year-over-year, with a gross margin of 50–52% [3]. For the full year, Zacks Consensus Estimates project revenue of $37.83 billion, a 23.81% increase from 2024 [5]. Yet, the stock trades at a forward P/E of 24.55–26.7x, significantly below the 39.1x industry average for semiconductors and 58.4x for U.S. semiconductors [1][4]. Even compared to peers like TSMC (23.7x) and ON Semiconductor (15.84x), ASML’s valuation appears undervalued [5].

This discount reflects short-term headwinds, including regulatory challenges and cautious guidance. However, ASML’s 52.0% gross margin and 23.6% five-year ROIC [6] highlight its operational excellence, while its 1.0% dividend yield offers income investors a buffer against volatility.

Regulatory Headwinds and the Path to Resilience

ASML faces geopolitical risks, particularly U.S. and Dutch export restrictions limiting EUV sales to China. While these curbs reduced China’s contribution to ASML’s revenue from 50% in 2024 to an expected 30% in 2025 [5], the company has not seen significant order cancellations. Demand for deep ultraviolet (DUV) systems in China remains robust, accounting for 25–27% of 2025 revenue [6].

Critically, these restrictions are unlikely to derail ASML’s long-term growth. The global demand for wafers—driven by AI and HPC—is not geographically constrained. ASML’s Q3 2025 guidance of €7.4–7.9 billion in sales, despite tariff uncertainties, further demonstrates its ability to navigate macroeconomic risks [3].

AI’s Infrastructure Boom: A Tailwind for ASML

The AI revolution is accelerating capital expenditures in semiconductor manufacturing. The global semiconductor industry is projected to grow to $697 billion in 2025, with a $1 trillion valuation by 2030 [6]. ASML, which forecasts a ~9% annual growth rate in the semiconductor end market through 2030 [3], is positioned to capture a significant share of this expansion.

Moreover, AI is transforming ASML’s own operations. Digital twin technology and AI-driven supply chain tools are enhancing production efficiency, reducing costs, and accelerating time-to-market for new lithography systems [6]. These innovations reinforce ASML’s competitive moat in an industry where R&D and customer relationships are paramount.

Conclusion: A No-Brainer Buy for the Long Term

ASML’s combination of a dominant EUV business, undervalued stock, and alignment with AI-driven demand makes it a standout investment. While regulatory and macroeconomic risks persist, the company’s conservative guidance and strong financials suggest these are temporary headwinds, not existential threats. For investors with a multi-year horizon, ASML offers a rare blend of near-term stability and long-term growth potential.

In a world where AI is the new electricity, ASML is the generator.

Source:
[1] ASML Sees 30% EUV Growth in 2025 [https://www.nasdaq.com/articles/asml-sees-30-euv-growth-2025-demand-sustainable-through-2026]
[2] P/E Ratio (Fwd) For ASML Holding NV ADR [https://finbox.com/NASDAQGS:ASML/explorer/pe_fwd/]
[3] ASML Q2 FY 2025 Earnings [https://futurumgroup.com/insights/asml-q2-fy-2025-earnings-reflect-strong-demand-but-with-future-uncertainty/]
[4] U.S. Semiconductors Industry Analysis [https://simplywall.st/markets/us/tech/semiconductors]
[5] ASML Returns to Normal Growth Trajectory [https://www.yolegroup.com/strategy-insights/asml-returns-to-normal-growth-trajectory-yole-group-insights/]
[6] Semiconductor Industry Outlook 2025 [https://www.infosys.com/iki/research/semiconductor-industry-outlook2025.html]