The stock market has plummeted since "Liberation Day," when President Donald Trump announced wide-reaching import tariffs. The news has hit technology companies particularly hard, with the tech-heavy Nasdaq Composite now officially in a bear market.
It's a stressful time for investors, but this kind of market turmoil can lead to good buying opportunities. One of my favorites right now is ASML (NASDAQ: ASML), a Dutch artificial intelligence (AI) company that produces equipment used to make semiconductors.
Over the last year, ASML's share price has dropped by more than 30%. Despite the recent challenges, its competitive advantages make it one of the top long-term investments in the tech sector.
ASML is a global leader in lithography
ASML produces lithography systems -- light projection systems crucial to semiconductor production. Chip manufacturers use these systems to etch patterns onto photosensitive silicon wafers. A wafer serves as the foundation of the chip. Semiconductor chips are widely used in modern-day tech, including smartphones, computers, and cars.
While other companies make lithography equipment, ASML is the only one that makes extreme ultraviolet (EUV) lithography systems. This is the type of system needed to manufacture the most powerful AI chips, and it's extremely expensive. For example, ASML's High-NA Twinscan EXE:5000 system, released last year, costs $380 million and weighs over 300,000 pounds.
At those prices, ASML doesn't need to sell a high volume to make billions. It sold 44 EUV systems in 2024, which accounted for 38% of its 21.8 billion euros in net system sales. It sells to some of the biggest chipmakers in the world, including Taiwan Semiconductor Manufacturing (NYSE: TSM), Intel (NASDAQ: INTC), and Samsung.
One natural concern, when a company has essentially a 100% market share, is that it won't be able to maintain its position. Competitors will enter the market and take a portion of the business. The biggest threat to ASML in this regard comes from China, which is investing about $40 billion in its chip industry and the development of EUV lithography systems. However, these systems are incredibly complex and difficult to produce. Any competing products will most likely take several years to develop, and there's no guarantee they'll match ASML's products.
ASML's well-positioned to capitalize on the growth of AI
The rapid growth in AI technology has ramped up the demand for semiconductors. According to the Semiconductor Industry Association, global semiconductor sales totaled $627.6 billion in 2024, up 19.1% from 2023. And they're projected to reach $1 trillion by 2030.
That would likely drive significant revenue growth for ASML since its EUV systems are essential to the production of AI chips. Now, last year wasn't overly impressive for the tech company in this regard. Total revenue was 28.3 billion euros in 2024, a modest 2.6% increase from 2023. ASML's earnings releases last year are a large part of why its share price had already fallen, well before the news about tariffs.
Early indications are that 2025 will be a much better year for ASML. Its revenue projections are 7.5 billion to 8 billion euros for the first quarter of 2025, which would be a year-over-year increase of between 42% and 51% (depending on where exactly revenue lands). As far as long-term projections go, ASML believes it could reach sales of 44 billion to 60 billion euros in 2030.
A quality company that you can buy at a cheap price
ASML essentially has a technological monopoly, and you won't find companies like that often. Shares are affordably priced, too, as the current forward price-to-earnings (PE) ratio is fairly affordable for a tech stock.
There is always the risk that the AI boom will fizzle out, especially if the economy softens. In that situation, tech companies planning to invest billions in AI may decide that money is better spent elsewhere. However, the AI market is expected to keep growing, and some of ASML's biggest customers have announced major expansion plans.
ASML plays a crucial role in semiconductor production that only it can fill. With its dominant market position, this company is well-equipped to handle economic uncertainty, and it's a fantastic stock to consider adding to your portfolio.
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Lyle Daly has positions in ASML. The Motley Fool has positions in and recommends ASML, Intel, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: short May 2025 $30 calls on Intel. The Motley Fool has a disclosure policy.
