Netherlands-based ASML Holdings N.V. provides advanced semiconductor capital equipment solutions. ASML manufactures ultraviolet lithography systems critical to the production of integrated circuits. The company, based in Europe's top technology hub near Eindhoven, has operations in Europe, the Americas, and Asia, and employs 33,000 people. The company supplies both primary semiconductor companies such as Intel and Samsung as well as merchant foundry companies such as Taiwan Semiconductor. Together with its partners, ASML is driving the development of more affordable, more powerful, and more energy-efficient chips and devices.

Investment Themes for 2025 The long-term trend in the U.S. stock market has been higher. In the 40-plus years since Ronald Reagan became president in 1980, stocks have turned in profitable performances almost 80% of the time. The average annual gain has been 13%. The year 2024 was another winner, as stocks extended a bull market that began in October 2022. The rally was ignited by falling inflation and has been fueled by lower interest rates, consistent economic growth, and rising growth rates for corporate profits. But despite the positive historical trends, there's no guarantee that 2025 will be a bell-ringer as well. The start of the year may be difficult, as the Federal Reserve wrestles with stubborn inflation, the employment environment potentially weakens from a historically strong position, and geopolitical issues simmer. But earnings growth is expected to accelerate to a low-double-digit rate year over year during the first half. And should inflation resume its downward trek, providing the central bank with more latitude to cut rates, the outlook for the second half should improve. We believe the stock market will take its cues from two sources in 2025. First is the Fed, which has been in the driver's seat for this second leg of the bull market ever since it pivoted on its rate outlook. Second will be earnings growth, which is already solid but could get a boost in 2025 from President Trump's new policies. It is at least modest comfort that the first year of the four-year presidential cycle historically has been good for equity returns. In all, our economic, earnings and valuation models support a forecast for a positive year for stocks. We expect to see earnings grow 12%, after a 9% increase in 2024; that interest rates will continue to trend lower as the Fed continues to ease; and that valuations will at least hold steady. Our target price for the S&P 500 is 6700, or about 10%-12% above current levels. In a certain-to-be-unpredictable investing environment, we present 10 key themes that we think will be important over the next 12 months. Some of these themes blur boundaries between sectors -- and that is by design. While we have specific sector recommendations (such as over-weight the Information Technology and Financial sectors), we also think that some factors and themes supersede industry characteristics and can drive performance for diversified groups or portfolios of stocks. Theme 1: Management Signals This is among our most important themes and certainly is one that stretches across industries. At this stage of the economic and market cycles, Argus recommends that investors pay close attention to companies sending upbeat signals to the market by raising guidance and increasing dividends. We think consistent -- and accelerated -- dividend growth at a company gives three important signals to investors in the stock: 1) the company's balance sheet is strong enough to pay a dividend; 2) management is mindful of shareholder returns, which include dividends; and 3) a significant dividend increase can be a message from management to the market that the near-term outlook for the company is promising, even during an economic slowdown. We especially like companies that have grown their dividends at an average double-digit pace over the past five years. Stocks on our BUY list that meet this test include American Express Co. (AXP), Moody's Corp. (MCO), Nasdaq Inc. (NDAQ), Trane Technologies (TT), Broadcom Inc. (AVGO), and Motorola Solutions (MSI). This theme touches a select group of stocks in almost every industry. We have built two investment products that leverage this theme: a UIT with our partner SmartTrust and a Separately Managed Account that is on several platforms. In regards to raising guidance, companies that have consistently increased their financial expectations as the year progress include Cintas Corp. (CTAS), Parker-Hannifin (PH), Williams-Sonoma (WSM), Sherwin-Williams (SHW), and UnitedHealth Group (UNH). Theme 2: Artificial Intelligence At Argus, we expect S&P earnings to grow 12% this year and we like companies that increase their dividends at a 10%-plus rate. How does the AI marketplace stack up against those metrics? Pretty well, as a matter of fact. Argus has derived a model of the size and scope of the global AI industry, based on our coverage of major publicly traded players and most of the mid-tier players, along with our industry knowledge of private players. We estimate the global AI industry annual revenue amounted to $250 billion in 2024, and we expect that to grow at a 40% CAGR through 2030, when total revenue is forecast to reach $1.8 trillion. Admittedly, determining a realistic estimate for the size of the Artificial Intelligence industry is a challenge, as there is simply no measurable unit of AI output comparable to barrels of oil or tons of steel. Some AI development occurs within laboratories and at universities -- and results are measured in tangible progress against AI objectives, not dollars or units of output. In the corporate world, many pure-play AI companies service micro-niches, have little measurable revenue, and are deeply unprofitable. The emergence of China's DeepSeek, which caused a broad selloff in AI stocks, is a reminder that this space is dynamic and unpredictable. DeepSeek is reportedly inexpensive and powerful in achieving certain AI tasks. While pricing is important, companies in the AI space prioritize relationships, continuity, security, and reliability. The number one priority for companies using AI delivered as-a-service across cloud is to ensure that delivery is secure, low latency (fast), and reliable. Adding new vendors always entails risk that these requirements will not be met. U.S. government policy is highly likely to prevent wide dissemination of Chinese LLMs in enterprise technology implementations in the U.S., given risks of 'back doors' to Chinese military and Chinese intelligence. Non-U.S. nations are largely following similar policies, which will inhibit acceptance of Chinese AI LLMs worldwide. Finally, AI hardware leaders such as Nvidia and AMD also offer GPU software libraries, model training, and inference services tailored to specific enterprise AI applications. The AI market is large and growing, and new entrants are expected to continue to disrupt the market. Argus believes that much of the revenue and most of the profitability from the AI industry is attributable to several giant U.S. and a few international companies. These companies primarily operate in growth sectors such as Information Technology, Communication Services, and Consumer Discretionary. Key companies in those areas include Advanced Micro Devices (AMD), Amazon.com (AMZN), Microsoft (MSFT), Apple (AAPL), Meta Platforms (META), International Business Machines (IBM), Alphabet (GOOGL), Salesforce (CRM), Nvidia (NVDA), Qualcomm (QCOM), and others in the U.S. China is also a hub of AI development, with companies such as Baidu, Tencent, and Alibaba (BABA) all developing AI solutions to enhance their core businesses. There is also significant AI activity among companies pursuing advances in IoT, vehicle electrification, autonomous driving, automation and connectivity solutions for manufacturing, warehousing, construction, and other areas. Some of these companies include Honeywell (HON), Rockwell Automation (ROK), Deere (DE), Ford Motor (F), General Motors (GM), Tesla (TSLA), Emerson Electric (EMR), and others. Theme 3: Clean Energy The rise in global land and sea temperatures, the melting of Arctic Sea ice, and the alarming frequency of extreme weather events (last fall's hurricane season, including Beryl, Debbie, Helene, and Milton, inflicted at least $200 billion in damages and 400 deaths overall) provide evidence that climate change is occurring. United in their concern over greenhouse gas emissions (GHG) stemming from fossil fuel power plants and car and truck tailpipes, 194 member states of the United Nations signed the Paris Agreement in 2015. This legally binding international treaty on climate change seeks to limit global warming to well-below two, preferably 1.5 degrees Celsius, compared to pre-industrial levels. Concerns over the health of the planet and its inhabitants as well as reluctance to be reliant on overseas fuel sources have prompted governments around the globe to develop and deploy clean, renewable sources of energy. In the U.S., the Inflation Reduction Act of 2022, enacted by the 117th Congress, calls for the investment of $391 billion in programs and incentives relating to energy security and climate change, including over $120 billion for renewable energy and grid energy storage, tax credits for wind power, solar power, clean energy manufacturing, electric vehicle incentives, and other energy efficiency measures. We expect the IRA to kick Clean Energy into a higher gear. Already, wind power as a percentage of U.S. electricity generation has grown from less than 1% in 1990 to 10.2% by 2022, this according to the U.S. Energy Administration. The global solar power market is also large and quickly growing. It generated $235 billion in 2022 revenues, and is projected to rise at a compound annual growth rate of 6.9% to $293 billion in 2029. The electric vehicle (EV) market is still in its nascent stages, but already comprises about 14% of all new cars sold globally, according to the International Energy Agency. Virtually every automotive manufacturer in the world is pursuing a variety of hybrid and EV strategies in an effort to meet consumer demand, as well as comply with government regulators, which continue to pressure the traditional automotive and trucking industry to achieve better mileage standards and reduce carbon emissions. At Argus, we are building out a new Clean Energy sector of coverage. Initial stocks in this universe include Albemarle (ALB), AES Corp. (AES), First Solar (FSLR), Generac (GNRC), GE Vernova (GEV), Roper Technologies (ROP), Rio Tinto (RIO), Veralto (VLT), and Xylem (XYL). Theme 4: Sustainable Impact Investing Sustainable Impact Investing, or ESG, is gaining traction not only with Argus Research clients but also with the global investment community. According to the Global Sustainable Investment Association, global assets under management in ESG (Environmental, Social, and Governance) strategies had grown to $40 trillion in 2020, up from $23 trillion in 2016 and on track for $50 trillion by 2025. The UN Principles for Responsible Investing -- to which Argus Research is a signatory -- now represents more than 5,000 signatories, according to UNPRI.org. As assets have flowed in over the past 40 years, Sustainable Impact Investing has evolved. The discipline, originally known as Socially Responsible Investing, focused at first on excluding companies that conducted business in South Africa or participated in industries such as tobacco, alcohol, and firearms. In time, the list of industries to avoid increased to include soft drinks, fast food, and oil and gas, among numerous others. Performance of these initial strategies lagged, and the approach has been modified. Now, instead of merely identifying industries to avoid, the discipline promotes 'sustainable' business practices across all industries that can have an 'impact' on global issues such as the climate, hunger, poverty, disease, shelter, and workers' rights. Twice a year, we screen the companies in the Argus Universe of Coverage against sustainable impact criteria established by JUST Capital Inc. We have designed a portfolio based on this investment theme, in conjunction with UIT partner SmartTrust, and as a separately managed account. Stocks that score highly on the sustainable impact criteria and are featured in our portfolio include Ecolab (ECL), T Mobile US (TMUS), Walmart (WMT), Goldman Sachs (GS), JPMorgan Chase (JPM), S&P Global (SPGI), Travelers (TRV), Eaton Corp. (ETN), Lam Research (LRCX), Hewlett-Packard Enterprise (HPE), and KLA-Tencor (KLAC). Theme 5: Innovation It seems likely that innovation will always be an investment theme at Argus, as long as the U.S. economy continues to evolve to address increasingly complex demands from domestic consumers and global markets as well. New products are obviously innovative, and BUY-rated companies in our coverage that excel in this area include Adobe (ADBE), Analog Devices (ADI), Eli Lilly (LLY), Boston Scientific (BSX), and Intuitive Surgical (ISRG). But to us, innovation also includes continuous improvement of products and processers. Leaders in this area include Apple (AAPL), JPMorgan Chase (JPM), Royal Caribbean Group (RCL), Oracle (ORCL), and United Rentals (URI). An often-overlooked aspect of innovation is being first to new markets, as seen at companies such as S&P Global (SPGI), which is early in the ratings industry in China; Visa (V) in new cashless transactions; Quanta Services (PWR) in renewable energy; and MSCI Inc. (MSCI), which is a leader in passive investment products. Our last innovation focus is on the industry disruptors, who blur borders in sectors and push boundaries. These companies include Alphabet (GOOGL), Amazon.com (AMZN), Meta Platforms (META), Charles Schwab (SCHW), and Costco Corp. (COST). Theme 6: Cybersecurity The large number of well-publicized security breaches in recent years forced businesses and government agencies to invest heavily in cybersecurity products and services to meet the challenge. Cybercrime cost the world an estimated $6 trillion in 2021, compared to $3 trillion in 2015, according to Cybersecurity Ventures. Stastista estimates that those figures will climb to over $10 trillion in 2025 and nearly $16 trillion by 2029. These staggering cybercrime totals represent one of the largest transfers of wealth in the history of humankind. Following earlier efforts by the U.S. Department of Homeland Security, the increasing threat to critical infrastructure and threats to national security prompted the U.S. government to create the Cybersecurity and Infrastructure Security Agency (CISA) in 2018. The agency is tasked with reducing threats to U.S. physical and cyber infrastructure, and coordinating cybersecurity efforts to counter private and government-sponsored hackers. The cyber security solutions market, consisting of dedicated hardware, software, and services, comprises a $170 billion annual revenue opportunity -- one that we expect will grow at more than a 10% compound annual growth rate (CAGR) over the next several years. The market is comprised of several major sub-segments, including network security, endpoint protection, cloud application security, and web gateway protection, among others. Despite the influential positions of several cybersecurity titans, Microsoft, Cisco Systems, Palo Alto Networks, and Tego Fortinet, the cybersecurity sector remains receptive to new entrants, due in part to low barriers to entry, as well the ever-evolving cyber-threat landscape, which keeps companies, government agencies, and non-profits on the lookout for fresh tools to combat the threat of data, financial, and reputation loss. Companies poised to benefit in this sector include Palo Alto Networks (PANW), Microsoft (MSFT), Cisco Systems (CSCO), Fortinet (FTNT), CrowdStrike Holdings (CRWD), and Broadcom (AVGO). Theme 7: Investing in the Cloud Cloud computing has transformed the technology landscape over the past decade. Created almost accidently as a means or organizing customer invoices, cloud has grown from the management of outsourced technology hardware resources to encompass tasks, up to and including software development, big data analytics, and artificial intelligence (AI). Indeed, following availability of ChatGPT in November 2022, awareness of generative AI hit the business community like an electric shock, and has completely upended IT spending plans for the next several years. Given that delivery of AI will mainly occur within a hybrid cloud environment, emergence of AI-as-a-service represents a difficult-to-quantify, but undoubtedly positive driver of cloud service revenues in the coming years. The leading providers of cloud services tend to be large technology and communications services companies that provide many goods and services distinct from or adjacent to their cloud businesses. These companies include Amazon.com, Microsoft, Alphabet, and others in the United States, along with Alibaba, Baidu, Tencent, and others in China. Collectively, participants in the cloud eco-system grew revenue by a high-teens compound annual rate from 2016 to 2023. Revenue for cloud services has held up relatively well, as cloud transition is a long-tailed process and cloud transformation has become an imperative. According to IDC, revenue in the industry grew 21% in 2024. Looking ahead, with inflation growth slowing and amid improving business and consumer confidence, both consumer device demand and enterprise IT spending should accelerate. We expect rising device demand and enterprise IT spending both domestically and internationally to drive cloud investment in 2025 and beyond. Some of the companies that should benefit in the space include Amazon.com (AMZN), Alphabet (GOOGL), Microsoft (MSFT), Oracle (ORCL), Salesforce (CRM), Adobe (ADBE), International Business Machines (IBM), NetApp (NTAP), Dell Technologies (DELL), and Hewlett Packard Enterprise (HPE). Theme 8: Aerospace and Defense Years of under investment in commercial aircraft and military equipment, coupled with a resurgence in airline travel and recent geopolitical tensions, bodes well for the aerospace and defense industry. On the defense side, Argus Research expects solid U.S. government military spending over the next few years as our country looks to counter recent technical advances in our adversaries' arsenals. No doubt that the U.S. budget will also replenish equipment given to Ukraine for its defense against Russia and to Israel in its war with Hamas. According to the Congressional Budget Office, the proposed 2025 defense budget is $850 billion. International orders will increase the amount spent globally on defense as Donald Trump has sent our foreign allies scrambling to fulfil their share of defense spending. These international orders generally come with higher margins for U.S. defense companies, giving them a boost in profitability. On the commercial aircraft side, the recovering global airline industry should help to boost commercial aerospace demand. The global passenger projection for 2024 was about 9.5 billion, or 104% of the 2019 level, representing 10% growth from 2023. Argus expects this number to continue to accelerate in 2025 as lower interest rates put more money in the pockets of consumers and the Trump administration enacts policies to lower the price of petroleum products, including aviation fuel. We look for increased investment in new aircraft as aerospace companies modernize their fleets amid cuts in all but the most crucial expenditures since the COVID-19 pandemic. Maintenance, repair, and overhaul services (MRO) also should provide tailwinds for companies in the industry, given the recovery in airline flight hours. Record backlogs in aerospace and defense, coupled with the resolution of the machinist strike at Boeing last fall, should also help to drive sales. Companies in the industry that should benefit from these trends include General Dynamics (GD), Northrop Grumman (NOC), GE Aerospace (GE), Howmet Aerospace (HWM), L3Harris Technologies (LHX), and Ledios Holdings (LDOS). Theme 9: Uptick in Capex Amid Declining Interest Rates High interest rates have been plaguing businesses and consumers alike since the Fed began its campaign to tame inflation in March 2022. The resulting hikes in interest rates made borrowing more expensive for companies, many of which curbed expenditures in the face of higher financing costs. Often new equipment purchases and major projects were delayed. According to the Atlanta Fed's Business Inflation Expectations survey, 80% of businesses reported that interest rates were impacting investments in capital expenditures. Of those surveyed, 43% indicated that they stopped or decreased capital expenditures and 30% said they were accessing credit less frequently. Another 13% indicated that they stopped or lowered levels of research and development. Interest rates also negatively impacted consumer demand, resulting in excess inventory at distributors, lower company sales, and shrinking margins. Elevated interest rates stood as high as 5.50% for over a year until the end of 2024, when two rate cuts brought the fed funds rate down by a total of 75 basis points. Argus expects these and future rate cuts to spur economic growth in 2025 and beyond as businesses embark on delayed mega projects and consumers regain their appetite for purchases requiring financing. While nearly every market sector will benefit from lower interest rates, we believe the Industrial sector is well positioned for a recovery that will also profit from the reshoring of manufacturing jobs to the U.S. As interest rates continue to fall, Argus expects industrials to see an uptick in demand for new buildings, agricultural machinery, facility upgrades and expansions, as well as heavy machinery and site automation. Companies prepared to benefit include Eaton (ETN), Rockwell Automation (ROK), Emerson Electric (EMR), Johnson Controls International (JCI), Carrier Global (CARR), and Deere (DE). Theme 10: Pharmaceuticals and Biotechnology The use of prescription medication has risen dramatically over the last decade. In the U.S., Statista estimates that medications were dispensed in 2022 some 60% more than in 2012. What's more, the percentage of the population over the age of 65 (the elderly) is increasing dramatically. In the U.S. alone, the Census Bureau reported that in 2022 nearly one in five Americans (18%) were elderly, reflecting an increase of 39% over the last decade. This is important as it is estimated that a staggering nine out of 10 elderly adults take prescription medication and more than half of them report taking four or more prescribed drugs. While the elderly represent the majority of the prescription market, those under the age of 65 also are taking more medications than ever as treatments become available for chronic and rare diseases. Blockbuster drugs are also contributing to the skyrocketing use of prescriptions. For instance, the market for GLP-1 medications used for weight loss and diabetes reached $47 billion in 2024 and is projected to reach $150 billion by 2030, according to market research firm MarketsandMarkets. Similarly, the global Alzheimer's market was valued at $8 billion in 2024 and is expected to grow at a 5% compounded annual growth rate through 2032. Over the coming years, the industry will continue to face headwinds from patent expirations on key drugs. A growing number of Big Pharma companies have turned to AI for drug development to boost revenue streams. Consulting firm McKinsey & Company notes that more than 250 companies are in the AI-driven discovery space, a number we expect to increase in the coming years. These tools have shortened the time it takes for companies to discover new or improved medications, providing the ability to ramp up portfolios to treat diseases. At Argus, we believe that the prevalence of prescription medications and the variety of drugs available will continue to expand as demand remains strong and the use of AI in drug development aids researchers. Companies poised to benefit include AstraZeneca (AZN), Merck (MRK), Eli Lilly (LLY), Sanofi (SNY), and Noro Nordisk (NVO). Conclusion Look for these themes to be discussed and updated during Argus webinars and presentations, as well as in our Theme Model Portfolio reports.

ASML is the leader in photolithography systems used in manufacturing semiconductors. Photolithography is the process in which a light source is used to expose circuit patterns from a photo mask onto a semiconductor wafer. The latest technological advances in this segment allow chipmakers to continually increase the number of transistors on the same area of silicon, with lithography historically representing a high portion of the cost of making cutting-edge chips. ASML outsources the manufacturing of most of its parts, acting like an assembler. ASML’s main clients are TSMC, Samsung, and Intel.

ASML is the leader in photolithography systems used in manufacturing semiconductors. Photolithography is the process in which a light source is used to expose circuit patterns from a photo mask onto a semiconductor wafer. The latest technological advances in this segment allow chipmakers to continually increase the number of transistors on the same area of silicon, with lithography historically representing a high portion of the cost of making cutting-edge chips. ASML outsources the manufacturing of most of its parts, acting like an assembler. ASML’s main clients are TSMC, Samsung, and Intel.