The demand for semiconductors is huge, especially with the rise of artificial intelligence (AI). This has led companies to invest heavily in creating new computer chips. ASML, a key semiconductor equipment maker, saw its stock rise 40% this year but has since lost those gains. Currently, it’s down 36% from its all-time high, trading near $700 per share.
Current Situation
ASML provides advanced lithography machines essential for manufacturing the latest semiconductors, particularly for AI. Despite the high hopes during the AI boom, ASML’s order growth has slowed, with only €2.6 billion ($2.8 billion) in new orders in the third quarter compared to over €5 billion ($5.4 billion) last year. However, its revenue did grow to approximately $8.1 billion.
ASML expects a revenue of $38.4 billion in 2024, but its projection for 2025 has been lowered to between $32.5 billion and $38 billion, contributing to the recent drop in stock price.
Long-Term Outlook
The semiconductor market goes through cycles, and right now, ASML is experiencing a downturn outside of AI. However, it expects average annual growth of 9% through 2030, predicting it could reach $54.2 billion in sales by then, with potential operating earnings of $16.3 billion. Though not a bargain, this could yield good returns over the next five years.
Dividend Growth Potential
ASML’s stock may offer decent returns and dividends. Over the last decade, its dividend grew by 710%, and while the current yield is low (below 1%), there is potential for growth. With a commitment to increasing dividends and share buybacks, ASML seems like a solid investment, especially as it approaches a potential stock split at around $1,000 per share.
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