When investors think about leading artificial intelligence (AI) growth stocks, names like Nvidia, Broadcom, and Advanced Micro Devices may come to mind. And while these three chip designers are redefining modern data centers, there's an equally important semiconductor company that should be getting equal attention.

ASML (ASML 0.99%) is the most valuable publicly traded company in Europe. American depositary receipts (ADRs) of ASML currently change hands at around $1,000 a share. Here's why buying one share of ASML would be my top pick for investors looking to put $1,000 into AI growth stocks right now.

 

ASML's sales mix is increasingly AI-focused

ASML's business can be split into three main categories: 1. servicing its installed equipment base, 2. deep ultraviolet (DUV) device production, and 3. extreme ultraviolet (EUV) device production. Servicing the installed base provides steady cash flows and mainly involves DUV equipment. DUV is used for a big chunk of chip manufacturing, especially for non-critical layers. Think legacy analog and information technology chips. It's really only when the resolution demands nodes with wavelengths shorter than 7 nanometers that EUV is needed. ASML's most advanced EUV machines can even handle nodes below 3 nanometers. EUV is critical for chips used in logic and memory, such as AI chips and dynamic random access memory (DRAM) used in data centers and smartphones.

ASML's latest earnings report from Oct. 15 reinforced why the company is a consistent bet for long-term AI investors. EUV made up 48% of net sales, while installed base management was 27% and DUV was 25%. That means an increasing number of ASML's sales to semiconductor fabrication plants is equipment used to make advanced chips.

ASML's quality earnings growth supports its valuation

ASML is a simple way to bet on growing AI chip production, regardless of which hyperscaler, chip designer, or manufacturer is gaining market share. ASML wins as long as the pie is growing. It doesn't care how it is sliced. In this vein, it is a classic pick-and-shovel play that should benefit from the AI gold rush. And best of all, the stock is reasonably priced.

ASML sports a forward price-to-earnings (P/E) ratio of 36.3. It's not dirt cheap, but it's a fair price for a company that has a virtual monopoly on equipment that is used to make the most advanced AI chips in the world.

When looking at valuations of AI growth stocks, it's easy to get enamored by lofty projections and hopes of exponential growth over a multi-year period. However, it's a big mistake to overlook earnings quality. It's better to bet big on a company that can consistently grow earnings at a solid rate rather than one that needs a lot to go right to live up to expectations.

For example, Costco Wholesale sports a forward P/E of 47.5 -- which is more expensive than Nvidia's 39.9 forward P/E even though Costco is only growing earnings by high single digits to low double digits. But because investors are ultra confident that Costco can achieve this growth rate no matter what the economy is doing, they are willing to pay up for the stock.

A balanced AI stock to buy now

ASML is a great value for investors who believe demand for AI chips will steadily climb for years or decades to come. The greater the computing power, the more AI chips must be produced, and the more fabs will need to outfit existing and new facilities with the latest ASML EUV technology.

Add it all up, and ASML stands out as an impeccable buy now.