There are countless companies involved in the AI build-out, and a few of them fly under the radar despite their importance. One of those is ASML (ASML +0.65%), and there may be few companies that are more important in the AI build-out than it is. Why? It makes a machine that only it can produce. Furthermore, this machine is required in today's demanding chip fabrication process.
With ASML's technology monopoly on a critical piece of chip-producing equipment, it's one of the most important companies in the world. It also just announced some incredible news, and that could make the stock a buy right now.
Image source: ASML.
Business is booming for ASML
Because ASML makes machines for one industry, when its business is ramping up, it's a pretty surefire sign that chip businesses (such as Taiwan Semiconductor Manufacturing, known as TSMC) are going to see increased demand in two to three years as facilities around these machines are built. This is a great sign for the overall health of the chip industry over the next few years, and it shows that the AI build-out is far from over.
NASDAQ: ASML
Key Data Points
ASML posted another strong quarter, with 25% revenue growth. This isn't the fastest-growing AI stock in the world, but it is still a solid figure.
ASML Revenue (Quarterly YoY Growth) data by YCharts
However, that wasn't the fact that excited investors. What thrilled investors was that ASML bumped its revenue guidance for this year to between 43 billion and 45 billion euros. Previously, this mark was between 36 billion and 40 billion euros, so this is a major increase in guidance, considering the year is halfway over. With ASML having a pulse on the chip production industry, this is a telltale sign of increased chip demand on the horizon, which also confirms what one of its major clients, TSMC, said during its conference call.
With a strong quarter like that in its bag, is ASML a great buy now? The market is well aware of ASML's technological monopoly and the opportunity, which is why the stock is priced at a premium.
ASML PE Ratio (Forward) data by YCharts
ASML is by no means a cheap stock, but it is the only company in the world with its technology, and without it, the chips utilized today wouldn't be possible. So, is the price worth paying for the stock? In my eyes, no. I'd much rather invest in a downstream company like TSMC that's growing faster and benefiting from the same tailwinds as ASML is. While ASML is still a solid investment, I like others more.
