Since the launch of ChatGPT in 2022, artificial intelligence (AI) has been the driving force in the tech market. Most of the major tech companies are incorporating AI into their products, and the AI market is projected to grow to $4.8 trillion annually by 2033, according to a United Nations Trade and Development report.
There are plenty of companies looking to tap into that growth. For my money, Netherlands-based ASML (ASML 0.88%) is one of the AI stocks best positioned for long-term success. Here's why.
Image source: ASML.
ASML has a wide moat in the semiconductor industry
AI is a highly competitive space, but a few companies have carved out dominant shares of certain markets. For example, Nvidia is the top semiconductor chip design company and has capitalized on the exponential growth in chip sales to become the largest company by market cap.
ASML is a semiconductor equipment company that manufactures lithography systems that produce those chips. Semiconductor companies use lithography systems during the chip production process. For mass production of the most advanced chips, including AI chips, they use extreme ultraviolet (EUV) lithography systems.
ASML doesn't have much competition in this arena. Estimates in 2024 put its share of the lithography market at over 90%. It's also the only company in the world supplying EUV lithography equipment, and this would be an extremely difficult market for a competitor to enter. ASML's EUV machines are highly complex, containing about 700,000 components. For comparison's sake, a typical car has about 30,000 components. In all likelihood, ASML will continue to be the only game in town.
Many of the major chipmakers, including Taiwan Semiconductor Manufacturing, Intel, and Samsung, rely on ASML's equipment. With its wide moat, ASML is a strong AI company that should deliver strong growth over the next decade.
A good time to buy ASML
Trading at 27 times forward earnings, ASML is reasonably valued compared to other AI stocks. I've been picking up shares throughout the year, and if you're looking for quality AI companies to add to your portfolio, it's one to check out.
