Many top tech stocks are worth more than $1 trillion in market cap, thanks in large part to the growth opportunities in artificial intelligence (AI). Investors have been willing to pay significant premiums for companies that are poised to benefit from AI-powered growth.
One company that isn't near the $1 trillion threshold yet but that is in an excellent position to benefit from surging demand due to AI is Dutch-based ASML Holding (ASML 2.21%). At around $550 billion in market cap, it is the largest tech stock that isn't in the trillion-dollar club. Could it be the next one to join it?
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Why ASML looks to be a top AI stock to own
ASML plays a crucial role in the development of advanced chips. Its photolithography machines are used in etching circuit patterns on silicon wafers. And the company is the only provider of extreme ultraviolet lithography systems that are used to make advanced AI chips. Its dominance and competitive advantage in this space puts it in an excellent position to generate strong growth for the foreseeable future, as companies continue to invest heavily into AI.
The company has not only been experiencing strong, reliable double-digit growth due to AI, but it has done so while also maintaining solid gross profit margins north of 50%. As businesses continue to invest heavily into AI, ASML is in a fantastic position to be able to expand and become much more valuable in the future.
NASDAQ: ASML
Key Data Points
Is a $1 trillion valuation inevitable?
Morgan Stanley recently upgraded its outlook for ASML stock in light of strong numbers from Taiwan Semiconductor Manufacturing, which suggests that chip demand may be better than expected. Analysts at Morgan Stanley believe that ASML's stock price could rise by 70% from where it is today, as they anticipate stronger-than-expected AI spending in 2027. Analysts typically look at a period of around two years or less when factoring in their price targets.
If ASML were to rise by 70%, that would put its valuation at around $935 billion. While there's no guarantee that the stock will rise to those levels in the near future, there are clearly some encouraging catalysts ahead that can make ASML a much more valuable company in the years ahead. And that's why I wouldn't be surprised if ASML were to be the next AI stock to join the trillion-dollar club. It may just be a matter of time.
For growth investors, now may be an excellent time to buy the stock and hang on. Although it may not be cheap, trading at 50 times its trailing earnings, with a dominant position in the AI chip market and tremendous growth opportunities ahead, it's hard to go wrong with ASML as a long-term holding.
