ASML (NASDAQ: ASML) and Apple (NASDAQ: AAPL) are often viewed as tech sector indicators. ASML, a key player in lithography systems production, has seen its stock surge by 50% in the past year, overshadowing Apple’s modest 6% growth. The rise of ASML is attributed to its stronghold in the lithography market, enabling leading foundries like Taiwan Semiconductor Manufacturing to create cutting-edge chips. In comparison, Apple has faced challenges with slowing iPhone sales and regulatory issues.
Image source: Getty Images.
Despite this, ASML’s market cap of $390 billion lags far behind Apple’s towering $2.6 trillion valuation. The question arises – could ASML emulate Nvidia’s trajectory and evolve into a multitrillion-dollar chip entity by the end of the decade? Let’s delve into ASML’s potential growth prospects and the likelihood of surpassing Apple in the next six years.
The Significance of ASML as a Semiconductor Bellwether
Based in the Netherlands, ASML stands out as the premier producer of deep ultraviolet (DUV) and extreme ultraviolet (EUV) lithography systems. DUV systems cater to older, larger chips, while EUV systems are indispensable for crafting the world’s smallest, densest, and most power-efficient chips.
ASML’s meticulous refinement of EUV technology over three decades, coupled with the hefty cost and complex shipping of its EUV systems, has positioned it as the unrivaled leader in the market. Major foundries like TSMC, Samsung, and Intel rely on ASML’s EUV systems to manufacture top-tier chips for tech giants such as Apple, Nvidia, and AMD.
ASML’s current EUV systems can handle chips as minuscule as the 2-nanometer node. The upcoming high-NA EUV systems will enable the production of sub-2nm chips in the coming years, further solidifying ASML’s dominance in the high-end lithography sector.
Exploring ASML’s Growth Trajectory by 2030
ASML’s mastery of pivotal technology empowers it to sustain steady growth and robust gross margins amidst the cyclicality of the semiconductor industry. The table below illustrates its performance over the last six years.
|
Metric |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
|---|---|---|---|---|---|---|
|
Revenue growth |
22% |
8% |
18% |
33% |
14% |
30% |
|
Gross margin |
46% |
44.7% |
48.6% |
52.7% |
50.5% |
51.3% |
|
EPS growth |
27% |
1% |
38% |
69% |
(2%) |
41% |
Data source: ASML.
Despite this optimistic outlook, ASML faces export curbs amidst the U.S.-China tech war, which could lead to stagnation in sales growth in 2024. Analysts forecast a mere 1% revenue increase and a 3% earnings decline for the year.
Nevertheless, looking ahead to 2025, ASML anticipates a significant growth surge as macro conditions improve, export restrictions ease, and shipments of EUV and high-NA EUV systems ramp up. The competitive chip manufacturing race among TSMC, Samsung, and Intel will further fuel this growth trajectory.
During its last investor day in November 2022, ASML projected a revenue range of 44 billion euros ($48 billion) to 60 billion euros ($65 billion) by 2030. Based on sector expectations, this forecast implies a compound annual growth rate (CAGR) of 7% to 12% from 2023. Achieving this target could potentially double ASML’s stock price by the decade’s end.
ASML vs. Apple: Market Cap Comparison by 2030
Despite the growth potential, even if ASML’s market cap doubled to around $780 billion, it would still fall short of Apple’s valuation. Apple, with its diversified portfolio and brand strength, is projected to maintain its trillion-dollar status by 2030. While ASML may not reach Apple’s market cap, it could emerge as a more promising investment choice, given its vital role in the thriving semiconductor landscape and clear strategic direction for the future.
Investors should carefully weigh their options before investing in ASML, considering the volatility and potential of the tech sector. It’s important to research thoroughly and evaluate all factors to make informed investment decisions.
Disclaimer: The author holds positions in ASML and Apple. This content is for informational purposes only and does not constitute financial advice.