ASML Holding NV Stands Firm on Revenue Outlook Amid AI-Driven Boom
The Dutch manufacturer of cutting-edge chip-making machines, ASML Holding NV, has reaffirmed its long-term revenue forecast, betting on a surge in semiconductor demand driven by artificial intelligence (AI). This move aims to reassure investors after the company’s order intake fell short of analysts’ estimates in the third quarter, causing a selloff in its shares and those of other chip-related businesses.
AI-Driven Growth Propels Semiconductor Demand
ASML projects that sales will range from €44 billion to €60 billion by 2030, in line with its previous forecast. The company expects growing AI demand to boost global chip sales to over $1 trillion by 2030, representing an annual growth rate of approximately 9% in the semiconductor market. This growth will be driven by the increasing need for advanced AI chips, which will, in turn, require more of ASML’s extreme ultraviolet lithography machines.
Industry Bellwether
As the sole manufacturer of these critical machines, ASML is often viewed as a bellwether for the broader industry and an early indicator of global semiconductor demand. The company’s forecast is significant, as it highlights the potential for double-digit growth in EUV spending annually through 2030 for both advanced logic and DRAM.
Gross Margin and Capital Allocation Strategy
ASML forecasts a gross margin of between 56% and 60% in 2030. The company also confirmed its capital allocation strategy, expecting to continue returning significant amounts of cash to shareholders through a combination of growing dividends and share buybacks. ASML currently has an ongoing €12 billion buyback through 2025, of which only 14% has been repurchased.
US-China Tensions and Export Controls
However, ASML faces challenges from the US government’s ongoing efforts to limit China’s rise in the semiconductor sector. The Dutch government has struggled to find a balance between its US ally and ASML’s biggest market. Due to US pressure, ASML has never been able to sell its EUV machines to China and was restricted from shipping its second most-advanced tools from this year. China accounted for nearly half of ASML’s total sales in the third quarter, and the company expects China sales to account for about 20% of total revenue next year.
CEO’s Outlook
ASML’s CEO, Christophe Fouquet, expects a slow chip market recovery to extend “well into 2025.” However, he believes that next year and 2026 will be growth years for the industry and ASML overall. The company’s reaffirmed revenue outlook is a testament to its confidence in the AI-driven boom in semiconductor demand.
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