Group 1: ASML - ASML is a critical player in the global semiconductor supply chain, specializing in lithography technology essential for manufacturing semiconductor chips [3][4] - The company holds a dominant position in both mature and leading-edge lithography markets, particularly benefiting from the rise of AI technologies [6][7] - Despite its strong market position, ASML's stock is currently 17% below its 52-week high, primarily due to geopolitical issues rather than operational challenges [7][8] - ASML's current valuation is 28 times earnings, aligning with the S&P 500 average and significantly below its 10-year average of 38 [9] - The global semiconductor industry is projected to grow by 8% through 2040, indicating a favorable outlook for ASML [11] - ASML has a history of returning value to shareholders through stock buybacks and a 31% annual growth rate in dividends over the past decade [12] Group 2: Badger Meter - Badger Meter is North America's leading provider of water and sewer monitoring solutions, with significant historical stock performance, turning $1 invested in 2000 into $74 today [13] - The company's stock has recently declined by 27% from its 52-week high due to disappointing second-quarter earnings, where EPS growth was only 5% [14] - Despite the EPS shortfall, free cash flow grew by 19%, indicating underlying strength in the business [14][15] - Badger Meter's BlueEdge solutions are modernizing traditional water and sewer infrastructure, with a growing SaaS revenue stream that has increased by 28% annually since 2019 [16][19] - 85% of Badger Meter's sales are replacement-driven, providing ample opportunity for upselling to smart water solutions amid stricter regulations [19] - The company currently trades at 34 times free cash flow, below its five-year average of 43, and has a 0.7% dividend yield with a history of increasing payments for 31 consecutive years [21][22]

Investment Rating - The report assigns a "Buy" rating to several companies in the semiconductor sector, including ACM Research, AMEC, AccoTest, Cambricon, Horizon Robotics, Montage, NAURA, Piotech, and Will Semi [13]. Core Insights - The semiconductor industry in China is expected to see increased capital expenditure (capex) in the coming years, driven by local demand for advanced semiconductor capacities amid tariff uncertainties [2]. - There is a significant focus on high-end lithography systems, which are critical for producing advanced node semiconductors, as existing tools may soon become obsolete [3][4]. - The technology gap in lithography remains substantial, with a need for more skilled talent and a robust supply chain to support research and development [4][6]. Summary by Sections Investment in High-End SPEs - The industry is prioritizing investment in high-end lithography systems due to export controls on existing technologies, with a noted urgent demand for these systems in China [3]. Technology Gap - The complexity of lithography systems presents a significant challenge, requiring time for R&D and a greater pool of talent to expedite development [4][6]. Lithography Ecosystem - The lithography ecosystem in China is still in its early stages, with supply chain companies collaborating to develop necessary systems, although challenges remain in producing highly customized lens components [6].