Goldman Sachs: With a monopoly on EUV, ASML is the tollbooth that Taiwan Semiconductor Manufacturing Company and Nvidia must pay to build advanced AI chips

Goldman Sachs: With a monopoly on EUV, ASML is the tollbooth that Taiwan Semiconductor Manufacturing Company and Nvidia must pay to build advanced AI chips

ASML Holding NV, the global leader in semiconductor lithography, has solidified its position as the gatekeeper of advanced manufacturing technologies, particularly in the realm of Extreme Ultraviolet (EUV) lithography. This strategic dominance has significant implications for companies like Taiwan Semiconductor Manufacturing Company (TSMC) and Nvidia, which rely on ASML's technology to build cutting-edge AI chips.

In Q2 2025, ASML reported total net sales of €7.7 billion, with a gross margin of 53.7% and net income of €2.3 billion [1]. The company's near-monopoly in EUV technology, which is critical for sub-7nm chip manufacturing, ensures its pivotal role in the AI revolution. ASML's complex supply chain and decades of R&D investment create insurmountable barriers for rivals, reinforcing its strategic dominance.

Historically, ASML's stock performance around earnings releases has shown mixed short-term results, but the long-term trajectory remains robust. A backtest of ASML's performance with earnings release dates from 2022 to now reveals that while the 3-day and 10-day win rates are relatively high at 33.33% and 46.67%, respectively, the 30-day win rate is slightly lower at 46.67%. The average returns over these periods are negative in the short term (-1.65% over 3 days, -0.83% over 10 days), but turn positive over 30 days at 2.77%. The maximum return during the backtest period was 3.54% on day 26, suggesting that while immediate post-earnings volatility is common, the stock's underlying fundamentals drive longer-term gains.

The surge in AI adoption is accelerating demand for ASML's tools. EUV lithography sales are projected to grow by 30% in 2025, driven by increased layers in DRAM and logic chips for AI workloads [1]. Leading chipmakers like TSMC and Samsung have integrated ASML's EUV systems into their 3nm and 2nm roadmaps, with AI-specific chips accounting for a growing share of their production. This demand is not speculative; analysts estimate that AI-driven HPC and memory applications will account for over 40% of EUV demand by 2027 [1].

However, ASML's dominance comes with risks. Geopolitical tensions and export restrictions pose challenges, but the company's technological lead and pricing power mitigate these risks. ASML's €38 billion backlog as of Q1 2025 provides visibility for 2025, ensuring that customers remain locked into its ecosystem [1].

For investors, ASML represents a rare combination of secular growth and operational excellence—a business that not only benefits from the AI revolution but actively shapes it. ASML's role as the gatekeeper of Moore's Law is irreplaceable, positioning it for sustained profitability in the AI-driven future.

References:
[1] ASML reports €7.7 billion total net sales and €2.3 billion net income [https://www.asml.com/news/press-releases/2025/q2-2025-financial-results]
[2] ASML Sees 30% EUV Growth in 2025 - Yahoo Finance [https://finance.yahoo.com/news/asml-sees-30-euv-growth-124000836.html]
[3] ASML Holding NV: Leading the Semiconductor Lithography Market Amidst Global Challenges [https://www.ainvest.com/news/asml-dominates-lithography-market-china-constraints-analysts-predict-11-24-upside-2507/]
[4] ASML and the Unrivalled Future of Semiconductor Lithography: Can Global Rivals Compete? [https://cfi.co/technology/2025/03/asml-and-the-unrivalled-future-of-semiconductor-lithography-can-global-rivals-compete/]
[5] Sometimes it's that easy: ASML [https://www.reddit.com/r/ValueInvesting/comments/1mi4hh3/sometimes_its-that-easy-asml/]