Key Points
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ASML is the only company in the world capable of making the lithography machines used to manufacture AI chips.
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The stock has averaged a 23% annualized return over the past 20 years and a 20% annualized return over the past 30.
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ASML Holding (NASDAQ: ASML) has a competitive moat of a type that most companies can only dream about. It might be one of the best stocks to own in the world, given its competitive advantages.
But can an investment in just one company, no matter how dominant it is in its field, set you up for life?
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Getting that sort of return on investment from a stock is a tall order, and to do so would require a strong commitment. Even then, it’s a long shot. But if one stock could do that, ASML might have the best chance.
ASML owns its market
ASML is a Dutch company that is a major equipment supplier to the semiconductor industry. It makes the lithography machines needed to manufacture semiconductor chips, and it’s by far the dominant player in its niche, with roughly 83% market share.
But more specifically, it is the only company that has the technological capability to produce extreme ultraviolet lithography (EUV) machines, which in turn are the only machines able to make today’s high-performance AI chips. It literally enjoys 100% market share in EUV lithography machines, which are used by leading foundries such as Taiwan Semiconductor and Samsung.
In the third quarter, ASML’s revenue increased by 26% to 11.7 billion euros from the previous quarter, not year over year. Net income was 5 billion euros, up 72% from Q2.
In Q4, it anticipates revenue of 14.2 billion euros and 15.2 billion euros, up 26% from Q3 at the midpoint. Net sales for fiscal 2026 are forecast to land between 44 billion euros and 45 billion euros, up 36% at the midpoint over fiscal 2025. Its gross margin is projected to be 56%, up from 52.8% in 2025.
And demand for its systems is only increasing as we head into 2027 and 2028 — and beyond. The supply of machines it currently plans to manufacture in both 2027 and 2028 will not fully meet the demand, so the company is looking to boost its own production capacity for 2028 beyond the 30% increase already planned, ASML President and CEO Christophe Fouquet said.
“We are increasingly receiving orders for 2028, and customers are also expressing interest in placing orders for 2029 and even 2030,” Fouquet added.
A massive technological advantage
ASML is so well positioned because of its technological advantages.
Due to the complexity of making an EUV lithography system, ASML had to spend 30 years developing the technology before it was able to bring it to market. At this point, considering the state of the competitive landscape, it would take perhaps 10 to 15 years of development for a would-be rival to match the EUV machines that ASML currently has, according to analysts — and by then, ASML — which has continued to push the technology forward with its latest high-numerical-aperture (high NA) EUV machines — will doubtless be working on even more advanced iterations.
Plus, ASML is a supplier to the entire industry, so it doesn’t matter if foundry or manufacturer names change, or if new chipmakers gain ground; they all will have no choice but to come to ASML for equipment.
Can an investment in ASML stock set you up for life?
There aren’t many stocks that have performed better than ASML has since it went public in 1995. The stock is up by about 47% over the past year.
It has a 10-year average annualized return of 32%, and over the past 20 years, it has posted an average return of 23%.
ASML data by YCharts.
Since the company went public, ASML stock has averaged a 20% return.
So, assume that dominance continues for at least the next two decades, due to the unfolding AI boom, which Fouquet said could last 10 to 15 years, and ASML’s massive technology advantages.
Suppose you invested $10,000 in ASML stock right now, reinvested your dividends, and held on for 20 years. If the stock matches the 23% average annualized return it has delivered over the past 20 years, you would have a stake worth about $628,000. And if you contributed $100 per month to that initial investment, in 20 years, you would have a stake worth about $983,000.
And if you held it for 30 years and averaged a 20% return, you would have about $2.4 million. With $100 per month contributed, that would jump to $3.9 million.
So, yes, investing in ASML could set you up for life. But you’d have to buy the stock, hold it for at least 20 years, and also be diligent about adding to your position every month. You would also be assuming returns similar to those it has had in the past. Given its strengths and the AI cycle that we are in, those high long-term returns are certainly in play.
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Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
