The semiconductor market is booming, with companies investing heavily in new chips for artificial intelligence (AI). ASML, a leading supplier of semiconductor equipment, saw its stock rise 40% this year but has since lost those gains. Currently, it’s down 36% from its peak, trading close to $700 per share.
Orders Slow but AI Demand Remains
ASML manufactures advanced lithography machines essential for creating cutting-edge semiconductors, especially for AI applications. Despite strong demand for AI, ASML’s orders in Q3 fell to €2.6 billion, down from over €5 billion last year. Revenue grew to $8.1 billion, but new orders may not convert to revenue for at least a year.
Long-Term Growth Outlook
While ASML is currently facing a downturn in segments other than AI, it still projects an average annual spending increase of 9% through 2030. If this trend holds, revenue could reach around $54.2 billion by then. Given its operating margin of 30%, this could yield $16.3 billion in profits, indicating a promising future despite recent setbacks.
Dividend Potential
ASML’s stock could appreciate over the next five years, offering dividends to investors as well. The dividend has increased by 710% over the past decade, and while the current yield is below 1%, there’s potential for growth. ASML plans to continue raising its dividend while reducing outstanding shares.
Considering the potential for price appreciation and dividend growth, ASML is a solid buy at its current price. It might also be a candidate for a stock split as it approaches $1,000 per share.
