What’s Happening With ASML Stock?

ASML (NASDAQ:ASML), the Dutch semiconductor equipment giant, has seen its stock decline by close to 5% over the last week, with the stock remaining down by 11% over the past month as trade tensions led the company to provide a soft financial outlook. During its Q2 2025 earnings report, ASML warned that it could no longer guarantee that its topline would grow in 2026, overshadowing what was otherwise a strong quarter. Revenue for the third quarter is projected at 7.4 to 7.9 billion euros, slightly below expectations. Gross margin is seen around 52%, narrowed from a prior range of 51% to 53%. This mixed outlook is at odds with the broader semiconductor market, which is seeing continued strength. For example, TSMC, the world’s largest semiconductor fabrication company, widely seen as a bellwether for the chip industry, posted strong quarterly results and raised its 2025 sales growth forecast to 30% in dollar terms.

That said, ASML is a one of a kind company. It builds what is arguably the most sophisticated piece of manufacturing technology and is essential to producing the cutting-edge chips that power everything from smartphones to AI data centers. Given its crucial role in the semiconductor value chain, is this a long-term buying opportunity?

Image by foto qin from Pixabay

Trade And Geopolitical Tensions

President Donald Trump has threatened 30% tariffs on EU imports, which could directly impact semiconductor equipment manufacturers such as ASML. Based in the Netherlands, ASML exports globally, with major customers including Intel in the U.S. and Asia’s TSMC and Samsung Electronics – both of which also operate fabs on American soil. The potential tariffs could drive up landed costs for customers importing ASML’s high-value tools into the U.S. For perspective, ASML’s latest-gen High-NA EUV machines can cost up to $400 million per unit. Meanwhile, ASML also has U.S. manufacturing operations in San Diego and these could also be exposed to retaliatory EU tariffs on goods exported back to Europe.

More importantly, if ASML’s customers were to pull back on capital spending, the ongoing trade disputes and export controls relating to the U.S and China could make it more difficult to forecast demand. As a dominant force in cutting-edge chip making technology, ASML has also become a geopolitical pawn in the escalating U.S.-China tech and trade rivalry, and Washington has pushed the Dutch government to adopt stricter export restrictions. While the company has been barred from selling its most advanced EUV tools to Chinese customers for several years now, new restrictions imposed last year require the company to get a license to export any immersion DUV or more advanced systems to China.

AI Narrative Drives EUV Demand

ASML’s key product is its extreme ultraviolet lithography (EUV) machines, which are critical tools used to produce the most advanced chips at process nodes of 5 nanometers and below. These systems use ultra-short wavelengths of light to etch circuit patterns, enabling chips that are smaller, faster, and more efficient. EUV is an important technology for extending Moore’s Law, which the long-standing industry trend of doubling transistor density approximately every two years, allowing chipmakers to continue pushing the limits of computing power and cost-effectiveness.

Demand for ASML’s products has expanded as semiconductor chips are incorporated into everything ranging from computing to cars. AI in particular has become a major tailwind for ASML of late, as the boom in training and running complex models demands the high-performance semiconductors its equipment enables. The company has reported that several of its major customers are ramping up their EUV capacity to meet rising demand for AI chips. The company expects EUV tool deployments to rise by about 30% in 2025, marking a broader industry shift away from older Deep Ultraviolet (DUV) technology toward EUV, which could help drive its revenues higher.

Is The Stock A Buy?

ASML stock trades at 27x estimated FY2025 earnings, which is a reasonable multiple considering ASML’s revenues are on track to grow by about 14% this year, per consensus estimates. Over the last quarter, ASML reported net bookings of 5.5 billion euros ($6.4 billion), about 25% ahead of forecasts, and a record 33 billion euro backlog ($38 billion). With 12 to 18 month lead times for most of its products, today’s orders should actually reflect customer confidence well into 2026 boding well for future revenue growth.  Moreover, the company’s dominant position, cutting edge and highly proprietary technology and exposure to the generative AI trend could also make the stock attractive.

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