ASML Holding Up 8% YTD: Should You Buy, Sell or Hold the Stock?

Core Viewpoint - ASML Holding N.V. has demonstrated strong performance in 2025, with an 8.5% year-to-date gain, outperforming major indices and competitors, despite facing near-term risks such as export restrictions and premium valuation [1][12][15] Group 1: Technology Leadership - ASML holds a near-monopoly in extreme ultraviolet (EUV) lithography, essential for producing advanced chips [2] - The technology enables the semiconductor industry to progress to smaller nodes, such as 3nm and below, with major customers including TSMC, Samsung, and Intel [3] - Investment in next-generation technologies like High-NA EUV indicates ASML's commitment to future advancements in semiconductor manufacturing [4][5] Group 2: Financial Performance - ASML reported a 24% year-over-year increase in net sales for Q4 2024, reaching €9.26 billion, with net income rising approximately 30% to €2.69 billion [6] - Earnings per share grew 30% to €6.85, and gross margin expanded by 90 basis points to 51.7%, reflecting strong operational efficiency [7] - Guidance for Q1 and full-year 2025 indicates continued growth, with expected revenue growth of 46.5% and 15%, respectively [9] Group 3: Order Backlog and Market Demand - ASML's order backlog stands at a record €36 billion, providing strong visibility into future revenues [10] - New orders in Q4 2025 totaled €7.1 billion, driven by demand for EUV and DUV machines [10][11] - AI-driven demand for high-performance computing chips continues to support interest in ASML's lithography tools, crucial for advancing production capabilities [11] Group 4: Challenges and Risks - Geopolitical risks, particularly export restrictions to China, pose significant challenges, as China accounted for about 41% of ASML's lithography shipments in 2024 [12][13] - Macroeconomic factors such as inflation and a sluggish recovery in mobile and PC markets add to the cyclical nature of the semiconductor industry [14] - ASML's stock trades at a premium P/E ratio of 29.22, higher than the sector average, which may limit immediate upside potential [15] Group 5: Investment Outlook - ASML's technological leadership, strong financials, and robust backlog support a favorable long-term investment thesis [16] - However, geopolitical risks and premium valuation suggest that holding the stock is the best strategy for now, with potential for future pullbacks or demand acceleration [16]