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Cramer's Lightning Round: ASML is a Buy

Wesley ParkTuesday, Jan 21, 2025 7:21 pm ET

3min read

In the fast-paced world of semiconductor technology, one company stands out as a beacon of innovation and growth: ASML. The Dutch multinational, a leading supplier to the semiconductor industry, has caught the eye of CNBC's Jim Cramer, who recently praised the company as a "remarkably great company" and a compelling investment opportunity. Let's dive into the reasons behind Cramer's bullish stance and explore why ASML is indeed a buy.

Firstly, ASML's dominance in extreme ultraviolet (EUV) lithography technology is a significant driver of its long-term growth potential. EUV lithography is crucial for manufacturing advanced semiconductor chips required for applications like AI, 5G, and high-performance computing. ASML's near-monopoly status in this technology positions it as a crucial supplier to the global semiconductor industry. In Q3 2024, ASML's revenue from EUV sales was €2.1 billion, highlighting the importance of this technology to its overall business.

Moreover, ASML's strong financial performance is another compelling reason to invest in the company. In 2023, ASML's revenue was €27.56 billion, an increase of 30.16% compared to the previous year's €21.17 billion. Earnings also grew significantly, reaching €7.84 billion in 2023, up 39.38% from the previous year's €5.63 billion. These impressive financial results demonstrate ASML's ability to generate substantial profits from its EUV technology and other offerings.

Another factor contributing to ASML's growth potential is the US government's investment in the semiconductor industry. The CHIPS and Science Act allocates around $52 billion for semiconductor manufacturing and research in the US. This investment supports ASML's business, as the company is a key player in the industry. Additionally, ASML's investments in research and development, which have increased from €1.1 billion in 2014 to a projected €6-6.6 billion by 2030, further solidify the company's position as a leader in semiconductor technology.

However, ASML faces challenges in maintaining its dominant position in EUV lithography, particularly due to US export controls. The restriction on selling EUV machines to China is projected to decrease China's share of ASML's total sales from 29% in 2023 to around 20% by 2025. To mitigate these challenges, ASML must continue to innovate and maintain its technological leadership in EUV lithography.

In conclusion, ASML's dominance in EUV lithography technology, strong financial performance, and investments from the US government make it a compelling investment opportunity. While the company faces challenges in maintaining its market position, its commitment to innovation and research and development positions it well for long-term growth. As Jim Cramer has highlighted, ASML is indeed a buy for investors looking to capitalize on the growth of the semiconductor industry.

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