Key Points
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Most semiconductor stocks had another day of bouncing back from last week’s brutal selloff.
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Despite recent jitters over AI growth, it appears the build-out will continue, perhaps with minor modifications.
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Elon Musk apparently isn’t slowing down, per the latest reporting on his Terafab.
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Shares of ASML Holdings (NASDAQ:ASML) rallied 5.9% on Monday as of 2:09 p.m. EDT, amid a broad semiconductor sector rally.
ASML had a rough month in October, with a decline that extended through the midterms after Democrats won big in last week’s elections.
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However, it looks as though the market may have overshot to the downside regarding the AI build-out. Furthermore, ASML and other semiconductor equipment names may be rising due to a weekend story about Elon Musk’s Terafab and its ambitious plans.
In anticipation of the midterms, AI stocks sold off hard, driven by fears that a Democratic “wave” election could curtail data center development in the U.S. After the Democratic win came in even bigger than expected, AI-related stocks sold off into another leg lower last week.
However, some investors apparently think the hate has gone too far. For one, Democrats haven’t outlined specific anti-AI data center policies. It appears investors may be recalibrating their focus toward financial contributions and environmental restrictions on new data centers, rather than outright bans. Some market commentators have also posited that AI companies will merely concentrate investments in states with more permissive regulations or go overseas.
One builder who apparently isn’t slowing down is Elon Musk. Over the weekend, Japan’s Nikkei reported that Musk has told semiconductor equipment suppliers that his Terafab project will target 1 million wafers per month by 2032, with 70% of its capacity allocated to memory chips and 30% to advanced logic chips.
That’s a massive number of semiconductor wafers, with the memory wafer projection roughly equivalent to Samsung‘s current DRAM output. Adding that many wafers would mean lots of ASML machine sales, given that ASML has a monopoly on the extreme ultraviolet lithography (EUV) technology needed to produce all leading-edge logic and memory chips.
Image source: Getty Images.
ASML remains a core holding
After the recent sell-off and today’s bounce, ASML trades at roughly 37.2 times trailing earnings and 26.8 times 2027 estimates.
That’s a very reasonable stock valuation for a company with growth prospects that, if Musk’s forecast comes to fruition, will continue through at least the end of the decade.
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Billy Duberstein and/or his clients have positions in ASML. The Motley Fool has positions in and recommends ASML. The Motley Fool has a disclosure policy.
