Research note · 2026-07-15 · 24 to 36 months horizon · conviction: High
ASML · ASML Holding
LONG
The one company AI cannot be built without: the sole supplier of the EUV lithography that every leading-edge chip requires, with a decade-plus moat and an installed-base annuity.
Situation
ASML is the only company in the world that makes EUV lithography machines — the tools required to print leading-edge chips for TSMC, Samsung, and Intel. No EUV means no advanced AI silicon. On ~€30B+ of revenue it carries a deep order backlog and a ~90% attach of high-margin service and upgrades on its installed base.
Complication
Semiconductors are cyclical, export controls to China threaten a slice of revenue, and the stock swings violently on near-term order timing. Bears fixate on a China air-pocket and the next cyclical downturn.
Thesis
1. A monopoly on the critical bottleneck
EUV — and now High-NA EUV — is a literal single-supplier chokepoint protected by a decade-plus R&D and supply-chain moat. AI compute demand structurally raises leading-edge wafer starts, and every one needs ASML.
2. The installed base is an annuity
Service, upgrades, and spares on a growing fleet generate recurring high-margin revenue that smooths the cycle and grows independent of new-tool order timing — the part of the model bears ignore.
3. The 2030 model anchors a long runway
ASML's own 2030 revenue and gross-margin targets imply years of double-digit compounding driven by AI-era leading-edge wafer demand — a structural growth path that the sharp cyclical swings in the stock tend to obscure.
Catalysts
| Window | Event |
|---|---|
| 3 to 12 months | Net bookings inflection — the leading indicator of the next up-cycle |
| 12 to 24 months | High-NA EUV shipments and customer adoption ramping |
| 12 to 36 months | AI-driven capex commitments from foundry customers converting to orders |
Risks and mitigants
| Risk | Mitigant / monitor |
|---|---|
| A deeper or longer semiconductor downturn | The service annuity and multi-quarter backlog cushion revenue; the 24-36 month horizon is set to ride through the cycle, not time it |
| Escalating China export controls | China is a minority of backlog; leading-edge AI demand — not mature-node China sales — is the growth driver |
| Customer concentration (TSMC / Samsung / Intel) | Those customers' capex is underwritten by AI end-demand; concentration reflects the monopoly, it doesn't threaten it |
What I am watching
- Quarterly net bookings
- Order backlog (euro value)
- Service + upgrade revenue growth
- Gross margin trajectory toward the 2030 model
Valuation
Comparable multiples
| Ticker | Company | P/E | EV/EBITDA | Rev growth | Note |
|---|---|---|---|---|---|
| ASML | ASML | 34 | 26 | +15% | Sole EUV supplier — no true peer for the monopoly |
| AMAT | Applied Materials | 22 | 16 | +8% | Broad WFE comp, competitive segments |
| LRCX | Lam Research | 24 | 18 | +9% | Etch/deposition comp, more cyclical exposure |
| KLAC | KLA Corp | 26 | 20 | +8% | Process control, closest quality comp within WFE |
Author estimates as of July 15, 2026 — verify against live data before relying on multiples.
Price targets
Interactive DCF
Sensitivity: implied value per share (WACC × terminal growth)
| WACC \ g | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|
| 7.0% | $823 | $901 | $999 | $1124 |
| 7.5% | $746 | $809 | $886 | $981 |
| 8.0% | $682 | $733 | $795 | $870 |
| 8.5% | $628 | $671 | $721 | $781 |
| 9.0% | $582 | $617 | $659 | $709 |
| 9.5% | $541 | $572 | $607 | $648 |
| 10.0% | $506 | $532 | $562 | $597 |
Green cells imply 5%+ upside to the current price, red cells 5%+ downside. Adjust the inputs above; the grid recomputes live.