ASML’s headline figures remained consistent, but ASML stock (NASDAQ:ASML) was slashed in half this year as investors worried about the semiconductor sector’s overall downturn and increasing interest rates. But, at current prices, might ASML stock (NASDAQ:ASML) be a good long-term investment? To help you decide, let’s look at four reasons to purchase ASML stock (NASDAQ:ASML).

1. It still has a monopoly on critical semiconductor technology.

As the world’s leading maker of photolithography equipment, which is used to etch circuit designs into silicon wafers, ASML is a global leader. It is also the sole manufacturer of high-end EUV (extreme ultraviolet) lithography equipment, which costs over $200 million and needs several aircraft to transport.

ASML’s EUV systems are used by the world’s most sophisticated semiconductor foundries, including TSMC, Samsung, and Intel, to build their smallest and densest chips. ASML’s monopolization of this critical technology elevates it to the forefront of the semiconductor industry, and it has no competition in its high-end niche.

This makes it one of the most well-balanced long-term bets on the semiconductor industry’s secular growth, which will continue to expand over the next several decades as more complex consumer electronics, cars, data centers, industrial robots, and Internet-of-Things (IoT) devices reach the market.

1. ASML Stock: It delivers consistent (albeit cyclical) revenue growth.

ASML’s stock (NASDAQ:ASML) expansion is cyclical. Its most recent decline came in 2019 when the semiconductor sector faced a slowing smartphone market and a memory chip supply glut. It expects another downturn this year, mostly due to its choice to ship systems to foundries at a quicker pace (and recognize revenue later) to address the current chip shortage rather than diminishing demand for such systems.

ASML’s long-term expectations are expected to be reduced during its next investor day on November 11.

1. ASML Stock: Unrivaled pricing power increases its long-term profitability.

ASML’s market supremacy in photolithography offers it considerable pricing leverage. That is why, despite prior cyclical downturns, its gross margins have constantly rebounded and increased.

ASML forecasts its gross margin to fall to slightly around 50% this year, but it will likely rise again as it delivers a greater proportion of its more expensive EUV systems vs. its less expensive DUV (deep ultraviolet) systems for lower-end chipmakers.

1. ASML Stock: China Ban will have a limited effect.

The Biden administration has prohibited the export of sophisticated semiconductors, semiconductor equipment, and associated services to China. This decision shook the semiconductor industry, although it had little impact on ASML, which earned 15% of its net system sales in China last year.

This is due to two factors. First and foremost, ASML is a Dutch corporation. Under pressure from the Trump administration, the Dutch had previously barred ASML from selling EUV equipment to key Chinese chip foundries such as SMIC in 2020.

Second, ASML primarily supplies DUV equipment to Chinese chipmakers, which are used to create older and bigger devices. The Biden administration’s restriction on “advanced” processors made at or below the 14nm node does not apply to these systems. That’s why ASML CEO Peter Wennink said that the recent US export sanctions against China will have a “minimal” effect on system sales in 2023.

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