AI Boom: Why ASML’s Recent Dip is a Buying Opportunity
Artificial intelligence (AI) has been driving the current bull market since 2023, with the launch of OpenAI’s ChatGPT setting off a new arms race in the industry. One stock that has been impacted by this trend is ASML (NASDAQ: ASML), which recently dipped 34% from its peak earlier this year after a disappointing forecast. However, this dip presents a buying opportunity for long-term investors.
A Unique Position in the Semiconductor Industry
ASML occupies a unique position in the semiconductor industry as the only maker of extreme ultraviolet (EUV) lithography machines, which are used to make the most advanced, smallest-node chips. This gives the company a significant competitive advantage and positions it to benefit from the expansion of chip fabs around the world as governments and industries prepare for the AI era.
Short-Term Headwinds
While ASML’s long-term prospects look bright, the company is currently facing short-term headwinds. Citing weakness in both the logic and memory segments, CEO Christophe Fouquet noted that the recovery would take longer than expected. Additionally, customer cautiousness and weak yields in key customers like Intel and Samsung have also impacted the company’s business.
Comparing to Alphabet’s Experience
A good recent example of a company that struggled with similar headwinds was Alphabet, which saw its revenue growth drop to just 1% in 2022’s Q4 due to fears of a recession. However, if you had bought the stock then, you’d be up more than 80% now. Similarly, ASML’s dip presents a buying opportunity for investors who believe in the company’s long-term prospects.
Why ASML is a Good Bet
Despite the short-term headwinds, ASML retains a significant competitive advantage and should eventually benefit from the coming boom in chip production due to AI. Even with its dialed-down guidance, the company is still calling for 16.1% growth at the midpoint and expects expanding gross margins and operating margins. As profits recover, the stock looks like a good bet to bounce back now that the weak forecast is priced in.
Long-Term Prospects
With its unique EUV technology, strong margins, and ramping AI demand, ASML looks like a great bet to be a winner over the long term. The company’s competitive advantage and positioning in the semiconductor industry make it an attractive investment opportunity for those looking to ride the AI wave.
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