In a world where giants like Nvidia and Microsoft dominate the headlines, ASML is not the first artificial intelligence company that comes to mind.

However, this Dutch company plays a central role in the development of the chips that make AI possible, making it one of the most strategic technology companies in the world.

The result of a joint venture established 40 years ago between Philips and the chip machine manufacturer ASMI (Advanced Semiconductor Materials International), ASML has a market value of around € 300 billion, placing it among the largest European companies by market value, alongside better-known giants like Novo Nordisk and LVMH.

Traded at 27x expected earnings for the next 12 months (about 25% below its historical average over the last 5 years), ASML offers an attractive opportunity for exposure to AI, especially when compared to multiples of other companies in the sector, like Nvidia, currently trading at around 40x the same multiple.

This is not the first time the world has been surprised by the size and importance of a Dutch company that also operates away from the public eye.

Founded in 1602, the Dutch East India Company (Vereenigde Oostindische Compagnie, VOC) was one of the first and most powerful multinational corporations in history. With the goal of monopolizing the spice trade between Europe and Asia, the VOC was key to the development of global trade, opening routes and establishing colonies in territories that now correspond to Indonesia, India, and other strategic regions in Asia.

Over 400 years later, ASML is a kind of contemporary East India Company, shaping the future of its industry profoundly, yet far from the spotlight.

The importance of chips in our lives is widely recognized. From smartphones to computers, through smart cars and appliances, these semiconductors are present in virtually everything we use.

Artificial Intelligence requires enormous processing power, and chips play a crucial role. Becoming smaller and more powerful, they are essential not only for emerging technologies but also for modern defense systems, as very well explored in Chris Miller’s book ‘The Chip War’.

In this context, ASML’s role has become increasingly crucial, not only for traditional chip manufacturers like Intel and Samsung, but also for many Silicon Valley companies, from Apple to Nvidia, that have adopted the fabless technology model, investing heavily in chip design and outsourcing their manufacturing to specialized companies, the so-called foundries.

ASML is the only company in the world capable of producing extreme ultraviolet lithography machines (EUV) that major chip manufacturers require so much.

About the size of a bus and costing between $150-250 million each (with the most modern models costing up to $350 million), these machines can engrave highly miniaturized (or denser) patterns on silicon wafers, a fundamental process in the semiconductor industry for creating increasingly smaller and more powerful chips.

The US considers this technology so strategic that for years it has lobbied to prevent ASML from selling its most modern machines in the Chinese market.

Its technological differential is not only due to the over €30 billion invested over the past 20 years, but also to the development of a complex supplier network. Building an EUV machine involves the integration of more than 100,000 individual components, requiring great logistical coordination and precision in assembly. Many of these components are manufactured by exclusive suppliers, some of them even having ASML as a shareholder, such as Carl Zeiss SMT, a producer of optical systems, where ASML has a 25% stake.

Replicating a company is already difficult; replicating an entire production ecosystem, like ASML’s, is bordering on impossible.

However, despite having such a large technological differential and being so fundamental to the growing demand for AI, the market has questioned its future performance.

In fact, this morning, a technical glitch prematurely revealed ASML’s third quarter numbers, expected only the following day. With net bookings below expectations (€ 2.6bn vs. € 5.4bn), and a revision of guidance for 2025 in both revenue (€ 30-35bn vs. € 30-40bn) and gross margin (51-53% vs. 54-56%), ASML’s stock fell more than 15% in the day, dragging down other important companies in the sector.

This result reinforced a more negative narrative for the company. For several months now, the market has shown more reluctance towards ASML, especially due to cyclical fluctuations in the memory chip sector, such as DRAM, which require less cutting-edge technology compared to the logic chip segment, like those demanded by AI. In addition, increasing US pressures on the Netherlands have sought to restrict ASML from providing less modern services and machines to Chinese companies, which currently represent about 25% of the company’s business, contributing to instability in the sector and affecting its growth expectations.

Although we recognize these challenges, we believe that ASML is uniquely positioned to take advantage of the growing demand for AI solutions, high-performance computing, Internet of Things, and autonomous driving, among others.

Specifically, ASML’s High NA technology (next generation of EUV), with superior optical design compared to current EUV technology, allows for the production of more powerful chips with better features and higher density, making it essential for the development of even more advanced and efficient technologies.

Furthermore, one of the key strategic questions for ASML in the coming years will be its geopolitical relationship. Taiwan Semiconductor Manufacturing Company (TSMC), one of ASML’s largest customers, is at the center of tensions between China and the United States. Any conflict in the region could severely disrupt the global semiconductor supply chain, which is not in the interest of many countries, particularly the United States. This puts ASML in a unique position, as the need for nearshoring (production closer to Western markets) requires significant investment in new factories and equipment, directly benefiting the company.

Its robust backlog points to a revenue growth of around 20% by 2025, giving us confidence that ASML, despite being in a cyclical industry, is on track to achieve its revenue target of €44-60bn by 2030, tripling its EPS in the period compared to today’s value.

It is difficult to predict who will be the ultimate winners in the current race for Artificial Intelligence, but the probability that they will be using chips manufactured with ASML’s machines is extremely high.

Whoever dominates the future of AI will, like the European merchants of the past, most likely be navigating with the essential aid of invisible technology from another great Dutch company.


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