ASML: The $300B giant you’ve probably never heard of
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ASML is a company based in Netherlands that manufactures machines for photolithography. You’re probably thinking “$300 billion dollar market cap for a process I’ve never head of? Yeah right.” But, Photolithography is the process by which patterns (designating a certain circuit) are placed onto silicon wafers. As chip shortages are hitting the whole world, equipment to produce chips is needed more than ever, and ASML has a practical monopoly on the field. ASML is the only company making Extreme Ultraviolet Lithography machines, which are needed to design the smallest and most intricate circuit boards.
Now you’re probably thinking, “This is a finance blog. Why is he telling me about a semiconductor manufacturer?” Well, some pretty big news about ASML just recently came out. Nathan Benaich, founder of Air Street Capital, and Ian Hogwarth, successful startup founder, have said that they believe ASML will climb to a value of $500B in the next year. Many semiconductor companies have seen their stocks skyrocket in the past year (see $NVDA and $AMD), and Benaich believes ASML is currently undervalued because of the fact it is based in Europe and the technology that ASML produces is like the behind the scenes for the behind the scenes of our technology. The $500B number comes from the fact that Nvidia and Taiwan Semiconductor Manufacturing ($TSM)are both valued at over $500B while being in a very similar space to ASML.
The pandemic has exposed many weaknesses in the current global supply chain, so many companies are scrambling to open chips manufacturing plants inside of the US, and ASML is really the only company that others can buy state of the art manufacturing equipment from. Both Taiwan Semiconductor Manufacturing Company and Intel plan to build chip manufacturing plants in Arizona, and lots of ASML equipment will likely be needed. Because of the expansion of chip manufacturing, ASML has stated that they expect revenue to reach around $30B by 2025 with current revenues of around $16B.
This part is not financial advice, just my opinion. I have been invested in ASML since the middle of August 2021. I am *somewhat* ashamed to say that I first heard about the company from TikTok, but as I did my research I saw this company as being one of the most important parts of the ever-continuing technological revolution. I think the main pro of the company is that semiconductor manufacturing equipment will always be needed as technology companies expand and more technology becomes part of our lives. There are some bear cases saying that ASML being in the Netherlands complicates its ability to grow or that other companies are catching up in the creation of manufacturing equipment and their moat will be filled in. But, I remain bullish and convicted, as I do with most of my picks.
