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ASML: Strengths and Upside Remain Despite DeepSeek Worries

ASML Artificial Intelligence

Key Points

  • ASML, one of the most important players in the chip industry, posted impressive results in Q4.
  • The stock has recovered much of the loss it incurred after the DeepSeek-related sell-off. Its bookings data provide some relief for the AI chip industry.
  • ASLM continues its dominance despite an early-stage challenge from a much smaller competitor. Analysts see significant upside in the stock.
  • Five stocks we like better than ASML.

ASML Today

ASML Holding stock logo
ASMLASML 90-day performance
ASML
$744.80 +0.58 (+0.08%)
As of 02/19/2025 04:00 PM Eastern
52-Week Range
$645.45
$1,110.09
Dividend Yield
0.72%
P/E Ratio
35.81
Price Target
$937.00

One of the chip industry giants just posted financial results that helped assuage the fears of many when it comes to AI investing. That company is ASML NASDAQ: ASML, a Dutch equipment manufacturer vital to the semiconductor industry. Shares of ASML dropped nearly 6% on Jan. 27 after news surrounding the Chinese company DeepSeek became widely publicized. A report that the firm built an open-source AI model, rivaling ChatGPT, for just $6 million sent many chip stocks plummeting. By the Jan. 29 close, ASML had recovered around half of that loss.

Below, I’ll detail the important news from ASML’s earnings. I’ll provide an updated outlook on the stock and break down how ASML’s results affect the broader semiconductor industry. I’ll also share why ASML executives see DeepSeek’s accomplishment as an opportunity rather than a risk.

ASML: AI Drives Strong Demand for Lithography Equipment

ASML has achieved over $275 billion in market capitalization through its stranglehold on advanced lithography equipment. This equipment is essential to chip makers like Taiwan Semiconductor Manufacturing NYSE: TSM. It enables them to produce the world's most advanced chips. When it comes to the most advanced lithography equipment, ASML has a near monopoly. As such, demand for ASML's extreme ultraviolet (EUV) lithography machines is a leading indicator of demand for AI chips.

ASML delivered both strong backward-looking and forward-looking results. In the fourth quarter, the company beat estimates on both sales and adjusted earnings per share (EPS) by nearly 3%. For the full 2024 year, sales notched up slightly from 2023. However, among the most important revelations from the report came in the company’s net bookings. Net bookings represent orders the company has received, an indicator of future revenue. Companies like ASML can’t actually recognize these orders as revenue until they deliver the equipment. Net bookings increased by a staggering 169% from Q3 to nearly 7.1 billion euros. This was around double the figure analysts expected.

Even more interesting was the company’s net bookings for EUV machines, the most advanced equipment it makes. EUV bookings came in at 3 billion euros, which is more than many expected. The company said that AI continues to drive demand for its equipment. ASML still maintains a massive 36 billion in bookings. One analyst estimated on the earnings call that this means 2025 is fully booked and 2026 is 30% to 40% booked.

Key Takeaways for ASML and AI-Chip Industry

There are some important takeaways from ASML's results. They show that, at least for now, investment in AI chipmaking remains strong. This rings particularly true when looking at the company’s much higher-than-expected EUV bookings. Fabricators need these specific machines to make the most advanced AI chips. Overall, the strong bookings of these machines are a positive indicator for AI-driven parts of the semiconductor industry. However, the net bookings likely don't reflect changes in ASML customers' long-term capital spending due to DeepSeek.

ASML Stock Forecast Today

12-Month Stock Price Forecast:
$937.00
25.81% Upside
Moderate Buy
Based on 12 Analyst Ratings
High Forecast$1,100.00
Average Forecast$937.00
Low Forecast$767.00
ASML Stock Forecast Details

ASML’s Chief Executive Officer indirectly addressed the implications of DeepSeek in an interview with CNBC. He said, “A lower cost of AI could mean more applications. More applications mean more demand over time. We see that as an opportunity for more chips demand." Overall, the CEO spun the potential democratization of AI through lower cost as driving higher volumes for its equipment. This feels like a fair take from the executive. 

However, if the industry sees it can make capable AI apps without the most advanced chips, demand for lower-cost ASML competitors could rise. ASML still completely dominates its market, but it isn’t the only player in lithography. Canon recently shipped its first nanoimprint lithography machine, which it hopes can rival ASML’s EUV machines. Manufacturers can use Canon’s machines to make chips using the 5-nanometer process. However, that’s still less advanced than the 4-nanometer NVIDIA NASDAQ: NVDA H800 chips DeepSeek apparently used to build its model. Overall, Canon has yet to pose a legitimate threat to ASML.

ASML: Still a Dominant Chip Name With Upside

ASML still looks like it is on firm footing. To me, the implications of DeepSeek are currently neutral for the stock. Given the strong results and outlook, there could be significant upside in ASML shares as the AI revolution pushes forward and continues to evolve. Wall Street analysts' price targets tracked by MarketBeat see implied upside in ASML shares of over 30% as of the Jan. 29 market close.

Should You Invest $1,000 in ASML Right Now?

Before you consider ASML, you'll want to hear this.

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While ASML currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

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Leo Miller
About The Author

Leo Miller

Contributing Author

Fundamental Analysis, Economics, Industry and Sector Analysis

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
ASML (ASML)
4.5179 of 5 stars
$744.80+0.1%0.72%35.81Moderate Buy$937.00
Canon (CAJ)N/A$0.00-100.0%11.57N/AN/A
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