What Could Go Wrong for ASML Stock? 3 Risks Long-Term Investors Should Watch

Core Insights - ASML's geopolitical risk is structural rather than existential, with national governments ultimately deciding the distribution of its technology [1] - China is heavily investing in domestic lithography capabilities, which could gradually narrow the technological gap with ASML, particularly in mature chipmaking processes [1] - ASML's unique technology and position in the semiconductor supply chain provide leverage, but geopolitical tensions and export restrictions pose significant challenges [4][3] Sales and Market Dynamics - ASML anticipates that customers based in China will represent slightly over 25% of its sales by 2025, highlighting the importance of this market for future revenue growth [2] - The company has faced export restrictions that limit its ability to ship advanced EUV and DUV systems to China, impacting its sales potential [3] Customer Concentration and Cyclicality - ASML's revenue is highly concentrated, with its top two customers accounting for 31% of revenue in 2024, making it vulnerable to their capital spending cycles [8] - Demand fluctuations in the semiconductor market can lead to order delays or cancellations, significantly affecting ASML's revenue [9] Technological Advancements and Execution Risks - The success of ASML's next-generation high-NA EUV lithography machines is crucial for its growth, but these systems are complex and costly, with each unit exceeding $400 million [12] - Rising R&D and production costs present challenges, as each new generation of technology becomes increasingly difficult to develop [14] Strategic Position and Long-term Outlook - ASML's deep integration with customers and extensive engineering expertise solidify its position as a critical player in the semiconductor industry [16] - Long-term investors should monitor ASML's ability to balance innovation, political pressures, and cost management as the chipmaking landscape evolves [17]