We recently compiled a list of the 10 Best Semiconductor Stocks to Buy for the AI Boom. In this article, we are going to take a look at where ASML Holding N.V. (NASDAQ:ASML) stands against the other semiconductor stocks.
More than two years have passed since the proliferation of the disruptive Artificial Intelligence (AI) megatrend, symbolically marked by the launch of OpenAI’s revolutionary product – ChatGPT. Since then, the AI revolution has accelerated rapidly, with 2023 and 2024 seeing a surge in demand for advanced AI applications across industries. This transformation has driven companies to increasingly rely on robust data centers that can support the computational power required by the intelligent algorithms.
In tandem with the rise of AI, the data center sector has experienced substantial growth. The need for larger, more efficient, and scalable data storage and processing capabilities has created a boom in infrastructure investments. Data centers, which house the powerful servers needed for AI workloads, have become critical enablers of this technology’s expansion. This increase in demand for data center capacity is a key factor that has propelled semiconductor stocks, as these centers rely heavily on cutting-edge semiconductors to deliver the speed, efficiency, and power necessary to process vast amounts of data in real time.
Our Methodology
We shortlisted 35 semiconductor stocks using the holdings of iShares’ Semiconductor ETF. Then we merged these stocks with Insider Monkey’s proprietary hedge fund holdings database and identified the 10 most popular hedge fund semiconductor stocks. 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).
A technician in a clean room working on a semiconductor device, illuminated by the machines.
ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders: 64
ASML Holding NV (NASDAQ:ASML) dominates the photolithography systems market, a critical technology for manufacturing semiconductors by projecting circuit patterns from a photomask onto silicon wafers using light. These advanced systems enable chip manufacturers to pack more transistors onto the same silicon area, a key driver of technological progress, with photolithography accounting for a significant portion of the cost of producing advanced semiconductor chips, including cutting-edge chips used in AI applications. The Dutch chip manufacturing machinery provider also ranked 9th on a recent list of AI news and ratings that Wall Street was watching.
After 3 years of explosive double-digit revenue growth, ASML Holding NV (NASDAQ:ASML) experienced a significant slowdown throughout 2024, with only 2% revenue growth projected for the full year. This, coupled with increasing geopolitical fears and intensifying US-China trade wars, has pushed the stock price down by -24% in the last 6 months. Nevertheless, during a recent investor’s day in November, management expressed confidence that secular growth opportunities with AI and significant technology improvements to drive efficiency gains for customers will help the company achieve the previously announced ambitious 2030 roadmap. The company continues to project double-digit EUV spending CAGR until 2030, driven by an anticipated $1 trillion+ semiconductor market as well as an increase in critical lithography layers.
ASML Holding NV (NASDAQ:ASML)’s management commented on its long-term outlook during the November investor presentation. Here is what they said:
“We will, of course, also reconfirm our view for 2030. So, a few weeks ago, we had a bit of, I would say, a more, I would say, conservative view for 2025. In many ways, this is related to the change of the market we’re going to talk about, this big transformation that AI is driving, but when it looks — when it comes to 2030, we are still very, very bullish. I think you have seen that this morning in the press release, and Roger give you again the fundamental that explains why we believe that 2030 is still a very, very positive year for us.
As I said before, the industry will require major innovation to address the need to improve cost and energy consumption on AI. And this will require to further boost the industry road map. Logic, DRAM will see major transformation in order to be able basically to deliver on those needs. And this will result in a product risk, which is more towards DRAM, more towards advanced logic, which is once again very beneficial for our customers and for ASML.”
Overall ASML ranks 10th on our list of the best semiconductor stocks to buy for the AI boom. While we acknowledge the potential of ASML as an investment, 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.