Cloud Stocks: ASML Rides High On AI Boom

Photo Credit: Benjamin Wiens from Pixabay


According to a recent report, the global Extreme Ultraviolet Lithography (EUV lithography) market is estimated to grow 33% annually to reach $153 billion by 2032 from $20.6 billion this year. While the US may be the leading market, APAC is estimated to be one of the fastest growing regions for the industry. APAC growth is being driven by China where the government is incentivizing the development of home-grown semiconductor solutions. Netherlands-based ASML (Nasdaq: ASML) is seeing slowdown in Chinese sales due to some of these initiatives.


ASML’s Financials

For the third quarter, ASML’s revenues came in at €7.52 billion (~$8.8 billion) ahead of the Street’s forecast of €7.79 billion (~$9.1 billion) . Net income of €2.13 billion (~$2.5 billion) marginally ahead of the €2.11 billion (~$2.5 billion) estimated by the market.

During the quarter, net bookings came in at €5.4 billion (~$6.3 billion), of which €3.6 billion (~$4.2 billion) was for its most advanced EUV photolithography machines. The market was looking for bookings of €5.36 billion (~$6.3 billion) for the quarter.

For the current quarter, the company forecast revenues of €9.2-€9.8 billion (~$10.8-$11.2 billion) with a gross margin of 51%-53%.


ASML’s China Concerns

ASML’s stock has climbed more than 50% since August due to the continuing demand of its technology to support the AI boom. Traditionally, China has accounted for a significant portion of bookings for ASML. In 2024, China contributed to nearly half of its bookings, and so far, the country has contributed to a third of ASML’s bookings. The geo-political trade tensions have resulted in the US imposing export bans on China, and China retaliating by imposing its own export controls. ASML expects bookings from China to fall “significantly” in 2026. But despite the numbers, ASML is not too concerned about growth.

According to the latest export control rules, companies will need to get an export license to ship rare earth materials as holmium, thulium, or ytterbium, or products based on these materials, from China’s Ministry of Commerce. China also imposed export controls beyond its own borders on products containing rare earth materials originating from China if their value content within that product is more than 0.1% starting December this year. These rules could mean that China will stop supplies of rare earth materials, and products containing rare earth materials globally. ASML believes that its supply and production cycles have been built to overcome this disruption. It still has over a month to buy rare earth materials or components containing them before the export controls are put into effect.


ASML’s AI Opportunity

Meanwhile, ASML is expected to see increasing demand by riding the AI boom. Analysts believe that ASML will be a big beneficiary of the recent Nvidia and Intel $5 billion deal. The deal requires Intel’s processors to be embedded into Nvidia’s AI systems. To deliver these high-performance chips, Intel will need to up its spending on semiconductor fabrication. ASML’s lithography systems are among the most sophisticated ones available to Intel. ASML’s EUV machines offer nodes below 3 nanometers that allow for billions of transistors to fit onto a single microchip. Its EXE platform offers a 2-nanometer Logic node that helps reduce process steps and boosts efficiency for high-volume manufacturing.

Additionally, ASML also entered into a partnership with French AI company Mistral. ASML invested €1.3 billion (~$1.5 billion) as part of the Series C investor for Mistral to gain 11% share in the company. The collaboration between Mistral AI and ASML will help ASML’s customers get access to innovative products and solutions enabled by AI. The partnership between a semiconductor equipment manufacturer and a leading AI company will help bring competences together to offer further opportunities for growth.

ASML’s stock is currently trading at $1,019.59 with a market capitalization of $395.4 billion. It had reached a 52-week high of $1,059 earlier this month. The stock has recovered from the 52-week low of $578.51 that it had fallen to in April.


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Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own ...

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