A handful of companies have technological monopolies on some of the world's most important devices. Investing in these companies is a genius move, as they are vital.
One of them, in the artificial intelligence (AI) realm, is ASML (ASML 2.06%). ASML makes extreme ultraviolet (EUV) lithography machines used in the chip manufacturing process. Without ASML, the advanced chip technology used today wouldn't be possible. As a result, it's one of the most important companies in the world.
However, ASML's stock is flat year to date and down around 35% from its all-time high. With other tech giants constantly hitting new all-time highs in the current market, is ASML well positioned to do the same?
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ASML's machines are used by foundries worldwide
ASML's technology is vital for cutting-edge chip fabricators. The chip foundry industry has only three major players: Taiwan Semiconductor, Intel, and Samsung. Taiwan Semiconductor has been the biggest winner by far and is constructing new fabrication facilities worldwide to meet rising chip demand, driven by AI, including a $165 billion investment in the U.S. alone. Demand for ASML machines is mainly coming from Taiwan Semi, because the other two have been losing business.
It's no secret that Intel's foundry business has struggled. It's currently losing money, and Intel's CEO has indicated that it isn't willing to invest heavily in the business in an attempt to revitalize it. It will invest in capacity only if it can find a customer first.
Considering Intel's poor track record in the foundry business recently, this is a terrible idea, as Intel needs to showcase its prowess before it can take such an approach. Intel's business will likely continue to deteriorate, which causes a headwind for ASML amid less demand for its cutting-edge machines.
NASDAQ: ASML
Key Data Points
Samsung isn't seeing as much success as TSMC, but it's also not struggling like Intel. Samsung has invested in new plants and recently partnered with Tesla to produce its AI6 chips. This partnership could cause increased demand, leading to more ASML machines being purchased.
With some of ASML's major customers not needing the capacity and TSMC, which is known for pushing ASML's machines to their technological limits, sometimes reluctant to upgrade them, the future isn't as bright for ASML as one might expect.
This pessimism showed up in ASML's financial results. Before Q2 earnings, management was adamant that 2026 would be a growth year, just as it had expected 2025 to be. Now management is taking this stance: "While we are still preparing for growth in 2026, we cannot confirm it at this stage."
That's concerning for investors, which is why ASML's stock has done so poorly. However, the outlook beyond 2026 is still bright, and long-term investors (those willing to hold for at least five years) should still be excited about the stock.
ASML's long-term outlook is still intact
One of the reasons ASML gave that 2026 might not be a growth year was uncertainty about tariffs. ASML is based in the Netherlands, so it is a potential target of U.S. tariffs. Management's commentary regarding 2026 was given before the U.S. and European Union reached a trade deal, so this outlook may shift now that a trade deal framework has been reached.
Regardless, management's long-term outlook of revenue between 44 billion euros and 60 billion euros by 2030 hasn't shifted, so whether the growth comes in 2026 or beyond is irrelevant as long as you're patient.
Over the past 12 months, ASML's revenue totaled 32.2 billion euros, so ASML's revenue could come in at the high end of the projection over the next five years. If it does, there's no doubt that ASML will be a market-crushing stock.
If ASML's revenue comes in on the lower end of that guidance, though, ASML's returns could lag the market's, making it a poor stock pick. Time will tell which of these paths ASML's stock takes, but considering the sheer demand for chips and the stabilization of trade relations, I think it's likely that ASML will come in on the high end of that range, making it an excellent stock to buy today.
