Key Points
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ASML is the world’s sole commercial supplier of extreme ultraviolet lithography equipment, which chipmakers need to manufacture today’s most advanced semiconductors.
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The company delivered record third-quarter revenue as its gross margin climbed to 57.5%.
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Management says its planned 2027 and 2028 production capacity will fall short of customer demand.
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Nvidia (NASDAQ: NVDA) has become one of the biggest companies on the planet thanks to the popularity of its graphics processing units (GPUs), which have become the gold standard for AI data center processors. Micron Technology (NASDAQ: MU) isn’t as large, but the stock is up more than 200% this year, driven by surging demand for its high-bandwidth memory chips.
Both companies have been central to the build-out of artificial intelligence infrastructure. But there’s a Dutch company that’s just as important. And unlike Nvidia or Micron, it doesn’t manufacture or design the chips themselves.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
That company is ASML (NASDAQ: ASML), and I’ve long believed it’s one of the most compelling ways you can invest in the AI infrastructure boom.
ASML has something its competitors don’t
Semiconductor manufacturers are constantly working to make their chips smaller, faster, more powerful, and more energy-efficient. But to manufacture chips with ever-tinier transistor sizes requires highly specialized equipment.
ASML makes state-of-the-art lithography machines, which use light to print microscopic patterns onto silicon wafers. Those patterns eventually become transistors and connections, allowing semiconductor chips to function.
ASML is special because it is the world’s only commercial supplier of the extreme ultraviolet (EUV) lithography machines that are capable of laying down those precise patterns with the requisite fineness. This makes them essential for any company that wants to manufacture today’s most advanced semiconductors.
No rival is even close to being able to replicate ASML’s systems, so it has an unquestioned competitive advantage. Chipmakers such as Taiwan Semiconductor Manufacturing, Samsung, and Intel depend on ASML’s equipment.
And as those chips become more sophisticated, ASML’s technology becomes increasingly important.
The company has already developed its next generation of technology — high numerical aperture EUV (High-NA EUV) lithography machines, which can print even finer patterns. Intel has begun using them in selected layers of its Panther Lake processors, while Samsung plans to introduce High-NA EUV into its advanced DRAM manufacturing by 2028.
Taiwan Semiconductor is also working with ASML on larger photomasks that could improve manufacturing productivity, and says it plans to introduce High-NA EUV into high-volume manufacturing for advanced nodes beginning in 2030.
These aren’t speculative applications. They’re a fundamental part of the semiconductor industry’s plans for producing increasingly advanced chips.
Demand is already outpacing ASML’s production plans
ASML’s third-quarter earnings report provided a pretty convincing demonstration of its importance. The company reported record revenue of 11.7 billion euros, with net income of nearly 5 billion euros. Gross margin reached 57.5%, up from 54% in the second quarter.
CEO Christophe Fouquet said customers are increasing their equipment demand forecasts, driven largely by their expectations for continued investment in AI infrastructure. Some are even expressing interest in placing orders for delivery in 2029 and 2030.
In fact, ASML now expects its planned production capacity for both 2027 and 2028 to fall short of customer demand. Management is exploring ways to expand its own manufacturing capacity beyond its previously announced plans.
That’s an extraordinary position for an equipment manufacturer. ASML isn’t simply benefiting from today’s spending on AI infrastructure. Its customers are already planning equipment purchases several years in advance.
Management expects full-year 2026 revenue between 44 billion and 45 billion euros, with gross margin around 56%.
Meanwhile, ASML’s installed base management business, which includes servicing and upgrading existing equipment, generated 3.3 billion euros in third-quarter revenue. That provides another source of revenue as customers seek more productivity from machines they already own.
Why I’m bullish on ASML stock
ASML’s advantages would be exceptionally difficult to overcome. It has a technological monopoly on systems that represent the culmination of decades of research and development, and the company is already working with major chipmakers on the next generation of manufacturing technology.
Nvidia and Micron have outstanding opportunities as demand for AI computing power continues to grow. But their successes will also depend on the semiconductor industry’s ability to manufacture increasingly advanced chips. ASML supplies equipment that helps make that progress possible.
And with customers already looking toward 2030 while near-term demand exceeds expected supply, I believe ASML deserves a place among the most compelling long-term AI investments.
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Patrick Sanders has positions in Nvidia. The Motley Fool has positions in and recommends ASML, Intel, Micron Technology, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
