We recently published a list of 10 Best AI Stocks to Buy Based on New AI ETF. Since ASML Holding NV (AMS:ASML) ranks 8th on the list, it deserves a deeper look.
Over the past few months the market has seen a massive influx of AI-related ETFs as investors look to ride the bandwagon of AI investing. A report from Wall Street Journal in June said that all ten AI ETFs tracked by website ETF.com saw inflows this year. One major AI ETF, launched by Roundhill, saw its assets grow to $35 million from under $1 million in just two weeks.
Amid the craze of AI ETFs, does it make sense to start investing in every new ETF? Analysts offer some guidance. A Wall Street Journal report quoted Morningstar analyst Kenneth Lamont, who said that we should look for “thematic purity” while investing in AI ETFs. The ETF you choose, according to the analyst, must be investing in “bellwether” stocks positioned to benefit from the AI industry trends.
There is a new AI ETF in town. KraneShares Artificial Intelligence and Technology ETF (AGIX), launched earlier this month, tracks the Solactive Etna Artificial General Intelligence Index, which captures the performance of AI tech companies. The index seeks exposure to three main AI categories: hardware, infrastructure, and applications. The index picks companies by assigning AI Exposure Score, which assesses each company’s relevance to AI tech. You can get exposure to AI companies focusing on data centers, LLMs, AI tech to reduce costs and improve customer experience.
In this article, we will discuss the top 10 holdings of this new AI ETF and see whether they have the potential to rise in the coming months and weeks. With each stock, we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
ASML Holding NV (AMS:ASML)
Number of Hedge Fund Investors: 75
ASML Holding NV (AMS:ASML) is the ninth-biggest holding of the KraneShares Artificial Intelligence and Technology ETF (AGIX).
ASML Holding NV (AMS:ASML) shares are down amid the company’s guidance that is based on fears of an expansion of restrictions by the US government on semiconductor exports to China. Management’s guidance for the third quarter fell short of expectations, predicting 7-17% quarter-on-quarter growth to €6.7B-€7.3B, below the consensus estimate of €7.67B.
However, some analysts believe geopolitical fears are priced in ASML Holding NV (AMS:ASML) and the stock has secular growth catalysts amid the rise in semiconductor demand following the AI boom. More specifically, ASML bulls believe the company’s Extreme ultraviolet (EUV) lithography has bright days ahead. The demand for EUV lithography tools is expected to skyrocket by 2025 and beyond driven by the need for advanced tools in DRAM and foundry/logic markets. The EUV tech is necessary for the manufacturing of developing advanced process nodes.
ASML Holding NV (AMS:ASML) remains a key beneficiary of this demand. A Jefferies report cited the company’s CFO who said that improved orders from TSMC (TSM) will drive the company’s 2025 outlook.
ASML Holding NV (AMS:ASML) has a near monopoly in the semiconductor industry as its machines are used by chip manufacturers to make physical chips.
ASML Holding NV (NASDAQ:ASML) supplies ultraviolet lithography photolithography machines used to manufacture advanced 3nm and 5nm chips. Jim Kelleher of Argus has set a $1,000 price target on the stock.
ASML Holding NV (AMS:ASML) was one of the stocks pitched during the SOHN Conference this year. Vijay Shilpiekandula of Dilation Capital, who was named the Sohn Idea Contest Winner, presented ASML as his best stock idea.
“What I find like good opportunity for investors in the market to think about right now is to be creative about the long-term capacities and the long-term earnings potential of this company based on this gold rush that all these memory makers and large language models are chasing,” Shilpiekandula said
Polen International Growth Strategy stated the following regarding ASML Holding N.V. (NASDAQ:ASML) in its fourth quarter 2023 investor letter:
“Netherlands-based ASML Holding N.V. (NASDAQ:ASML) and Japan-based Lasertec play dominant roles within different segments of the global semiconductor industry. In both cases, shares rallied significantly in the fourth quarter of 2023, prompting our positions to grow as a percentage of the overall portfolio. We believe both companies will see demand for their products as extreme ultraviolet (EUV) lithography and soon high-numerical aperture lithography must be utilized to manufacture the world’s smallest chips. However, in our estimation, 2024 could deliver a year of less exciting growth for the semiconductor industry, which prompted us to trim these positions back.”
Overall, ASML Holding NV (AMS:ASML) ranks 8th on Insider Monkey’s list titled 10 Best AI Stocks to Buy Based on New AI ETF. While we acknowledge the potential of ASML Holding NV (AMS:ASML), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ASML but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.