ASML Holding stock (NASDAQ:ASML) is one of the world’s major semiconductor stock. The Dutch firm is the leading manufacturer of photolithography equipment, which is used to etch circuit designs into silicon wafers. It is also the exclusive manufacturer of high-end EUV (extreme ultraviolet) lithography equipment, which is utilized to create the world’s tiniest and dense semiconductors.
ASML is a pillar and forerunner of the semiconductor industry, but its stock has lost more than half its value this year. Let’s take a look at the bear and bull cases for ASML.
ASML Stock: Bear Case
The bears believe that a combination of macroeconomic and regulatory obstacles would stymie ASML stock (NASDAQ:ASML) growth. Slower PC sales in a post-pandemic environment, inflationary and supply chain challenges for the smartphone industry, and more cautious data center operator investment are all predicted to dampen the market’s thirst for new CPUs.
In terms of regulations, the Biden administration imposed additional export limitations on Chinese enterprises that make chips at and below the 14nm node for semiconductors, semiconductor equipment, and services. This broad restriction may increase the supply glut and limit its long-term sales in China. Last year, China accounted for 15% of ASML’s net system sales, making it the company’s third-largest market behind Taiwan (39% and South Korea (33%).
ASML Stock: Bull Case
The bulls will argue that market demand for ASML’s systems continues to outpace available supply. ASML said in July that supply chain restrictions were stifling its sales growth, not decreased demand.
On TSMC’s most recent conference call, Investor Relations Chief Jeff Su stated that half of the company’s $4 billion Capex reduction was “related to tool delivery,” implying that the company did not receive enough EUV systems from ASML and the other half was a capacity reduction due to slower chip sales. To retain its lead over Samsung and Intel in the “process race” to create smaller and denser chips, TSMC still needs a steady supply of ASML’s EUV systems and its newer high-NA EUV systems.
As a result, TSMC and its competitors will not dramatically lower their EUV orders just because the semiconductor business is experiencing a cyclical downturn. Instead, ASML’s growth should restart when it fixes supply chain challenges and begins consistent deliveries.
Last but not least, at 21 times next year’s profits, ASML’s stock (NASDAQ:ASML) does not seem overpriced. It isn’t a steal just yet, but its monopoly on a critical chipmaking technique may easily justify that price.
Which of the following theories is more likely to be true?
I feel the bullish argument for ASML stock (NASDAQ:ASML) is more compelling. The firm is facing some near-term challenges, but I think it is still one of the better long-term options on the semiconductor market’s secular rise. While other investors are sobbing, you should purchase this stock.
Featured Image – Megapixl © Andreistanescu
Author Okoro Chinedu 
