ASML: Prepared for Growth Despite Challenges

The most significant winners in the stock market over the past two years have been companies driving groundbreaking innovations in the field of artificial intelligence (AI). At the forefront is Nvidia, a prime example of the rise of AI stocks. The company's GPUs are indispensable for training and operating large language models, which has led Nvidia's stock to soar an unprecedented 865 percent in the past 24 months. This impressive performance resulted in a 10-for-1 stock split in June. However, Nvidia was not the only company to conduct a stock split this year. Broadcom, Super Micro Computer, and Lam Research followed suit. Although a stock split doesn’t change a company's fundamental value, it sends a positive signal from management about future price jumps and strengthens investor confidence. Another promising company is ASML, a key player in supplying AI semiconductors. ASML manufactures and maintains photolithography machines that are crucial for producing advanced chips. These machines are essential for the production of high-performance semiconductors used in AI data centers. ASML anticipates that the year 2025 will be a crucial year with projected sales between 30 and 40 billion euros, an increase of 27 percent compared to 2023. Despite lower expectations for 2024 due to transitions, the long-term outlook remains optimistic. The growth prospects are also reflected in the anticipated margin expansion, with the gross margin potentially rising to up to 60 percent by 2030. Despite a current price of about 835 dollars per share, significantly below the peak of around 1,100 dollars, a forthcoming stock split might be possible. ASML has already split its shares in the 1990s and 2000 to maximize growth potential. Current developments in the AI chip market could motivate this again. Although ASML is not currently on the Motley Fool Stock Advisor's recommendation list, the stock proves to be an attractive investment compared to other AI stocks. Given the growth potential, the stock seems worthwhile despite a price that is 26 times the expected earnings.