Despite the continued market volatility, ASML (ASML -1.99%) is poised to remain the world's leader in making chip-fabrication equipment. In this video clip from the "Semiconductor Revolution" on Motley Fool Live, recorded on May 19, Fool contributors.com Jose Najarro and Nick Rossolillo discuss how the company has tailwinds working in its favor.
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Jose Najarro: ASML in their most recent earnings they did report that even right now, capacity is their biggest issue, they can only meet up to 60% of demand with the current orders that they have, so ASML, in the short-term, in reality, doesn't need to go find out any new customers.
At the end of the day, I mean, this is a market that continues to evolve, we're already seeing Samsung and TSM (TSM -2.56%) working on three nanometers. They need that equipment from ASML and those are products that are not expected to be released until 2025, 2026, or beyond that.
I think ASML definitely an interesting play, one that could get hit a bit hard, if we might start to see a slowdown, investors might wonder, hey, ASML might start to lose some of those orders but I think at the end of the day, if you're building chips, you're going to ASML for that equipment, Nick.
Nicholas Rossolillo: Yeah and about the current economic environment, bear in mind that the economy is not in recession, it might be, but currently it's not in recession, we're in an inflationary environment which actually I think could bode really well for ASML because it's getting more expensive to manufacture stuff, including chips and the equipment used to manufacture chips.
So, a lot of companies are really interested in acquiring this equipment, not just because they need the capacity, because of the chip shortage but they'd rather have it now than later when it might be more expensive a few years from now, like substantially more expensive a few years from now. So, I don't think the current stock pick is out-of-line at all, there are multiple headwinds working for these chip fab equipment companies.
ASML, Applied Materials (AMAT -2.00%) is my personal favorite pick that I own, Lam Research (LRCX -2.02%), I think they have some excellent tailwinds working in their favor, even though the market is presently hyper-focused on the "r" word, recession, and may not even happen, we don't know yet.