Bristlemoon Capital, a global equities firm, released its “Bristlemoon Global Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund returned 5.0% in the September quarter, 5.6% for September 2025, net of fees. Since its inception, the fund has produced a cumulative return of 19.3%, net of fees. The fund focuses on compounding the capital at attractive rates over the long term. In addition, please check the fund’s top five holdings to know its best picks in 2025. I ...

Industry Overview - The chip market, particularly in the context of artificial intelligence (AI), is expected to expand significantly over the next five years, driven by increasing data center capital expenditures projected to reach $3 trillion to $4 trillion by 2030 [1][6]. Company Analysis Nvidia - Nvidia is positioned as a primary beneficiary of the AI spending spree, with expectations that the big four AI hyperscalers will spend around $600 billion on data center capital expenditures this year [5]. - The company estimates it captures about 35% of the total spending on a data center, which positions it well for future growth as the market expands [8]. - Nvidia's graphics processing units (GPUs) are critical to the AI arms race, and its continuous innovation keeps it at the forefront of the industry [7]. Taiwan Semiconductor Manufacturing (TSMC) - TSMC is a leading chip foundry that fabricates chips for various tech companies, including Nvidia, AMD, Broadcom, and Apple, ensuring its long-term success regardless of specific technologies deployed [9]. - The company is set to launch 2nm chips later this year, which are expected to improve power consumption by 25% to 30% compared to its 3nm chipset [10]. - TSMC's innovations in energy efficiency are crucial as AI infrastructure expands, helping it maintain its leading position in the chip manufacturing sector [11]. ASML Holding - ASML is the sole manufacturer of extreme ultraviolet (EUV) lithography machines, essential for producing advanced chips, giving it a technological monopoly in the industry [12]. - The company's business is expected to grow alongside new chip factory constructions, making it a strong alternative investment in the chip space [13]. - ASML's stock is currently down approximately 30% from its all-time high, presenting a potential long-term value investment opportunity [13].

Group 1: ON Semiconductor - ON Semiconductor is heavily reliant on the automotive market, particularly the electric vehicle (EV) sector, which has faced challenges due to high interest rates and increased competition leading to low profitability [4][5]. - Despite current struggles, ON Semiconductor is a highly profitable company trading at less than 15 times estimated free cash flow in 2025, indicating potential undervaluation [6]. - The company has long-term growth opportunities, including a partnership with Nvidia for next-generation data center technology, suggesting a positive outlook for future revenue growth [7]. Group 2: Centrus Energy - Centrus Energy is positioned to benefit from the growing interest in nuclear energy in the U.S., especially following recent executive orders that have spurred investment in the sector [9][10]. - The company reported a backlog of $3.8 billion as of March 31, 2025, with $2.8 billion attributed to its low-enriched uranium segment, indicating strong demand and growth potential [11]. - Centrus Energy is uniquely capable of producing high-assay low-enriched uranium (HALEU), which is increasingly needed for advanced nuclear projects, further enhancing its growth prospects [12]. Group 3: ASML - ASML plays a critical role in semiconductor manufacturing, particularly in producing extreme ultraviolet (EUV) lithography machines essential for AI chip production [14]. - The demand for AI chips is expected to drive growth for ASML, as semiconductor fabs will need to increase production to meet rising workloads [15]. - Although ASML faces short-term challenges due to trade tensions and has tempered growth expectations for 2026, the long-term investment thesis remains strong, supported by reasonable valuation and dividend payments [16][17].

Core Viewpoint - Chip companies are currently profiting significantly from the AI arms race, particularly those involved in AI hyperscalers and cloud infrastructure [1] Group 1: Nvidia - Nvidia is a fabless chip company that designs chips and relies on external manufacturing, with its GPUs being the primary computing unit for AI due to their parallel processing capabilities [4] - Nvidia has experienced impressive sales growth, with a 69% revenue growth recently and a projected 50% growth for Q2 [5][7] - Projections from AI hyperscalers suggest continued capital expenditure growth, indicating a strong demand for Nvidia's chips, especially with the new export deal for H20 chips to China [8] - Nvidia remains a strong growth stock with significant potential for future expansion [9] Group 2: Taiwan Semiconductor Manufacturing - Taiwan Semiconductor is a leading chip fabricator for major tech companies and is diversifying its production globally, with a $165 billion investment in U.S. facilities [10][11] - The company expects its AI revenue to grow at a 45% compound annual rate over the next five years, with total revenue projected to increase at a 20% compound annual rate [12] Group 3: ASML - ASML holds a technological monopoly on EUV lithography machines, essential for producing advanced chips, benefiting from the global demand for high-end chip production [14][16] - The company faces challenges due to tariffs on its machines entering the U.S., but it maintains a long-term revenue guidance of 44 billion to 60 billion euros by 2030 [15]

Core Insights - Applied Materials (AMAT) is launching the EPIC Center, a significant investment in R&D, set to open in the first half of 2026, aimed at enhancing innovation in the semiconductor industry [1][10] - The EPIC Center will facilitate deep customer integration by co-locating teams from leading chipmakers to collaboratively develop advanced technologies [2][10] - The establishment of the EPIC Center is part of a broader EPIC Platform initiative, which aims to accelerate innovation and commercialization in the semiconductor sector [3] R&D and Collaboration - The EPIC Center will shorten learning cycles and accelerate time-to-market for customers by enabling direct collaboration on technologies such as gate-all-around transistors and advanced packaging [2][5] - Applied Materials has extended its collaboration with CEA-Leti to focus on specialty semiconductors, particularly in markets like IoT, automotive, and energy-efficient AI infrastructure [4] Competitive Landscape - ASML Holding is enhancing its EUV lithography machines, reporting up to 60% faster cycle times for customers using its latest systems [6] - Lam Research is also advancing chip development through its SEMulator3D platform, which allows customers to test new technologies before physical production [7] Financial Performance - Applied Materials' shares have increased by 13.2% year-to-date, slightly below the Electronics - Semiconductors industry's growth of 13.8% [8] - The company trades at a forward price-to-sales ratio of 4.92X, which is lower than the industry average of 8.67X, indicating potential valuation attractiveness [11] - Earnings estimates for fiscal 2025 and 2026 suggest year-over-year growth of 9.5% and 5.5%, respectively, with recent upward revisions in estimates [14]

Core Insights - Despite Wall Street's optimistic outlook for big tech in 2025, most technology stocks have struggled significantly, with the Nasdaq-100 declining nearly 7% year-to-date [1] - Current market corrections present exceptional wealth-building opportunities for long-term investors, particularly in the artificial intelligence (AI) sector [2] Company Insights - **Nvidia (NVDA)**: - Shares are down 19% year-to-date, presenting a compelling buying opportunity amid the tech sell-off [5] - Nvidia's GPUs are essential for AI development, creating a competitive advantage that rivals cannot overcome [6] - The company has seen a 383% increase in annual revenue over the past three years, indicating strong financial performance [7] - Nvidia is positioned to benefit significantly from the ongoing tech transformation, with a multitrillion-dollar commercial opportunity ahead [9] - **Palantir Technologies (PLTR)**: - The stock has surged 52% year-to-date, significantly outperforming major tech peers [10] - Palantir's software platforms enable organizations to integrate large datasets and deploy AI capabilities, transforming raw data into actionable intelligence [11] - Established relationships with government agencies provide a stable revenue foundation, while its commercial business is accelerating [12] - Palantir represents a compelling investment in the software and implementation side of the AI revolution [13] - **ASML Holding (ASML)**: - The stock has experienced a modest 5.2% decline year-to-date, despite its critical position in the AI value chain as the sole manufacturer of EUV lithography machines [14] - ASML holds a monopoly on the equipment necessary for producing advanced semiconductor chips that power AI applications [15] - Major chipmakers are increasing capital expenditures significantly, with TSMC raising spending by 34% and SK Hynix boosting its 2025 investment by 30% to $20 billion, indicating strong long-term demand for ASML's products [16]

Core Viewpoint - ASML, a key player in the semiconductor industry, reported strong revenue growth but faced a significant drop in net bookings, leading to a decline in share price despite beating earnings expectations [2][4][6]. Financial Performance - In Q1 2025, ASML reported a 46% year-over-year revenue increase, totaling approximately €7.7 billion (about $8.77 billion), and earnings per share of €6 (around $6.31), surpassing estimates by approximately 5% [3]. - The company reaffirmed its full-year 2025 revenue outlook of €30 to €35 billion (approximately $33 to $38.6 billion) despite slightly below-expectation Q2 revenue guidance [4]. Net Bookings - ASML experienced a 44% drop in net bookings compared to Q4 2024, reporting €3.9 billion (approximately $4.45 billion) in bookings, nearly €1 billion (about $1.14 billion) below expectations [6]. - The fluctuation in bookings is common for ASML, as seen in the previous year when bookings fell nearly 61% from Q4 2023 to Q1 2024 [6][7]. Market Sentiment - The market tends to overreact to bookings fluctuations, which can lead to significant share price movements [7]. - ASML's CFO indicated that bookings do not accurately reflect business momentum, especially given the high cost of its machines, such as the latest EUV product priced at around $380 million [7]. Future Outlook - ASML projects substantial growth through 2030, with revenues expected to increase by 50% to 105% compared to 2024 levels, and gross margins expanding by 180 to 580 basis points [10]. - The company has authorized a share buyback of up to 10% over the next 18 months and maintains a dividend yield of around 1% [11]. Analyst Ratings - ASML currently holds a Moderate Buy rating among analysts, with an average price target of $906.00, indicating a potential upside of 34.28% from the current price [10][12].

Core Viewpoint - ASML holds a technological monopoly in manufacturing extreme ultraviolet (EUV) lithography machines, which are essential for producing advanced chips [1][2] Company Overview - ASML is the only company capable of producing EUV machines, making it critical for technological advancements in the semiconductor industry [1][2] - The company has not been accused of anti-competitive practices, which supports its position in the market [2] Product and Technology - ASML's EUV machines are used to create electrical traces on chips, with current technology achieving trace distances as small as 3 nanometers [3] - Future advancements are expected, with 2-nanometer and 1.6-nanometer chips anticipated for release in 2025 and 2026 [3] Financial Performance - ASML's revenue guidance for 2025 was reduced due to export restrictions affecting sales in China, but the long-term revenue guidance for 2030 remains unchanged [5] - The company expects to generate between 44 billion and 60 billion euros in revenue by 2030, indicating a compound annual growth rate of 7.6% to 13.3% from 2024's revenue of 28.3 billion euros [7] Market Position - ASML's stock has decreased approximately 35% from its all-time high, presenting a potential buying opportunity as key clients announce expansions that will likely boost sales [5][6] - The stock is currently trading at its lowest valuation in three years from a forward price-to-earnings perspective [8][10] Investment Outlook - The combination of a low stock price, a 1% dividend yield, and projected double-digit growth makes ASML an attractive investment [8][10] - The company's technology is considered irreplaceable for the production of advanced chips, which are crucial for various high-tech applications [11]

Group 1: AI Market Overview - The recent correction in the Nasdaq Composite, driven by AI companies, has raised concerns about potential economic slowdowns affecting AI investments, but no signs of this have emerged yet, presenting a buying opportunity for AI stocks [1][2] - Companies in the AI hardware sector, particularly Nvidia, Taiwan Semiconductor, and ASML, are expected to emerge stronger from the current market correction due to ongoing investments in AI infrastructure [3][4] Group 2: Nvidia's Position - Nvidia is a key player in the AI arms race, providing GPUs that are essential for training complex AI models, which require significant computing capacity [4][5] - The CEO of Nvidia predicts a $1 trillion data center buildout, indicating strong growth potential in data center computing driven by AI spending [5][6] - Nvidia's stock is currently trading at 26 times forward earnings, which is considered a reasonable price given its growth potential [6][7] Group 3: Taiwan Semiconductor's Growth - Taiwan Semiconductor is experiencing high demand for chips, with a $100 billion investment announced to expand U.S. production capabilities, driven by the need for U.S.-produced chips [8][9] - The company expects AI-related chip revenue to grow at a 45% compounded annual growth rate (CAGR) over the next five years, with overall revenue increasing at around a 20% CAGR [10] Group 4: ASML's Unique Position - ASML is the sole provider of extreme ultraviolet (EUV) lithography machines, which are critical for manufacturing high-end chips, making it a vital player in the chip production expansion [11][12] - With its stock down approximately 35% from its all-time high, ASML presents a strong investment opportunity as demand for chips continues to rise [12]