ASML is highly cyclical, but the demand for AI chips bodes well for its future.Artificial intelligence (AI), and specifically, generative AI, has fundamentally changed the tech industry. These breakthroughs have shifted the tech economy and are on track to bring significant productivity gains.Many investors believe such a transformation is not possible without one company, and the company usually cited is Taiwan Semiconductor (TSMC). However, it would not be possible for TSMC to manufacture its most advance ...

Core Viewpoint - ASML is a dominant player in the lithography market, crucial for the production of modern electronics, and has shown significant long-term stock performance despite recent volatility [1][2][4]. Financial Performance - ASML's stock has increased over 600% in the last decade, outperforming the S&P 500's 200% return [2]. - In Q2 2025, ASML reported net sales of 7.7 billion euros and earnings per share (EPS) of 5.9 euros, both exceeding expectations [7]. - The company achieved net bookings of 5.5 billion euros in Q2, a 30% increase over analyst expectations of 4.2 billion euros [8]. Market Position and Demand - ASML's extreme ultraviolet (EUV) lithography machines are essential for semiconductor manufacturers, accounting for 48% of Q2 net system sales [6][7]. - The semiconductor industry is expected to see increased capital expenditures driven by trends in AI, driverless cars, and renewable energy [9]. Future Outlook - ASML projects revenue between 44 billion euros and 60 billion euros by 2030, with a midpoint estimate of 52 billion euros, indicating a 60% growth from current expectations of 32.5 billion euros [12]. - The company's price-to-earnings ratio (P/E) of 31 is below its 10-year average, suggesting potential for long-term investment [10]. Competitive Advantage - ASML maintains a strong market position with high profit margins and a robust balance sheet, making it less vulnerable to competition [13]. - The company is considered well ahead of competitors in the lithography market, which supports its business stability [13].

Financial Data and Key Metrics Changes - In 2023, ASML achieved total revenue of €27.6 billion, a 30% increase compared to the previous year, despite the semiconductor industry experiencing an 8% decline [15][17] - The gross margin improved to 51.3%, with net income reported at €7.8 billion and net bookings at €20 billion [17][25] - The company returned €3.3 billion to shareholders, including €2.3 billion in dividends and €1 billion in share buybacks [18][37] Business Line Data and Key Metrics Changes - The Logic business saw substantial growth, increasing from approximately €10 billion in 2022 to nearly €16 billion in 2023, driven by demand for advanced logic and mature technologies [18][20] - EUV technology sales grew by 30%, while DPV sales surged by 60%, indicating strong demand for immersion technology [17][18] - The applications business experienced a slight decline, attributed to its shorter lead time and lack of significant backlog [18] Market Data and Key Metrics Changes - ASML's sales in China increased significantly, rising from 14% to 29% of total sales, reflecting the company's ability to meet previously unmet demand in the region [21] - The company noted that the semiconductor market is expected to grow from €600 billion to around €1 trillion by 2030, indicating a robust long-term outlook for the industry [55] Company Strategy and Development Direction - ASML is preparing for significant growth in 2025, viewing 2024 as a transition year with expected revenue levels similar to 2023 [32][33] - The company is focused on building capacity and hiring talent to meet anticipated demand, particularly in advanced technologies [33][56] - ASML emphasizes the importance of sustainability and ESG initiatives, aiming for net-zero greenhouse gas emissions by 2040 [59][64] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the current downturn in the semiconductor industry but expressed confidence in a recovery, citing improved customer dynamics and tool utilization [34][35] - The company expects a stronger second half of 2024, driven by a healthy order intake and improved market conditions [34][36] Other Important Information - ASML's R&D expenditure reached €4 billion in 2023, reflecting the company's commitment to innovation and technology development [25][30] - The company reported a healthy cash balance of around €7 billion, providing resilience amid industry challenges [26] Q&A Session: All Questions and Answers Question: Impact of US Government Restrictions on Advanced DUV Machines - Management indicated that the restrictions would not significantly affect the 2025 or 2030 financial targets, as the impact is limited to specific factories under export control [80][89] Question: China's Advancements in DUV Technology - Management clarified that while China can technically achieve 5nm chips using multi-patterning, the economic feasibility for high-volume manufacturing remains a challenge [91][92] Question: Adoption of High NA EUV Technology - Management expressed confidence in the adoption of high NA EUV technology, noting that initial customer interest is strong, and the adoption will be gradual [94][96] Question: Free Cash Flow and Backlog Recovery - Management acknowledged that free cash flow is under pressure due to lower contract liabilities but expects a recovery in backlog as orders return [82][104] Question: Expansion Potential in Eindhoven - Management confirmed ongoing discussions with the Dutch government regarding expansion plans and emphasized the need for a supportive investment climate [83][102]