In recent years, ASML Holding N.V. (NASDAQ:ASML), the exclusive supplier of commercial extreme ultraviolet (EUV) and High-NA lithography machines, has found itself at the center of geopolitical, technological, and financial pressures swirling around the world. The Netherlands-based corporation enjoys a monopoly on the systems required to build fast processors. This unique position, coupled with the massive spending on AI chips, has resulted in an order backlog worth close to $45 billion. However, a deeper dive into the company provides some much needed context around one of the biggest growth stories in finance.
The Context Around an Impenetrable Moat
There is no doubt that ASML Holding N.V. (NASDAQ:ASML) has built an impenetrable moat in the chip industry. Technically, it has no competitors. This means that the biggest chipmakers in the world, like Taiwan Semiconductor Manufacturing Company, Intel, and Samsung, all rely on ASML to fabricate the next generation of 3nm or 2nm AI accelerators, smartphone chips, or High-Bandwidth Memory (HBM). The only stumbling block in this regard has emerged in recent months, with TSM expressing caution over high costs of High-NA EUV systems. The cost of these latest systems from ASML is estimated to be $400 million for just one machine.
Industry experts believe it takes ASML Holding N.V. (NASDAQ:ASML) one year to build one High-NA EUV machine. Some bears have argued that this could be an industry bottleneck as AI infrastructure expands. However, ASML CEO Christophe Fouquet has addressed these concerns, noting that the firm was doing everything possible to avoid this. The firm plans to ship 60 EUV tools this year and 80 in the next year. The company has said it could increase this number to 90 without adding any physical capacity. Analysts at investment advisory JPMorgan have said that the chip firm could make as many as 110 per year.
ASML Holding N.V. (NASDAQ:ASML) also has a highly specialized supply chain for these cutting edge machines. It relies on thousands of single-source suppliers to make the EUV machines. Even a minor hiccup from one of these could result in delays that would cost the company millions. However, ASML recently underlined that it had secured extra supplies of parts that take a long time to produce, including lenses and mirrors from German supplier Zeiss and high-power lasers from Trumpf. Reports indicate that Zeiss is expanding capacity to meet demand as the AI buildup shows no signs of slowing down.
In addition to the concerns around the latest systems, there is also some noise around the purchase of older DUV systems. For many years, Chinese companies have been the biggest buyers of the older generation of DUV machines from ASML. Some estimates place the China-linked revenue of ASML to be more than 20% of the total revenue made by the firm. After facing a blanket ban on the export of the latest EUV machines to Beijing, ASML is now grappling with the MATCH Act, a legislation introduced in the US Senate that aims to restrict Chinese access to DUV machines as well as maintenance services for installed models.
The United States government pressures allies like Japan and the Netherlands to align with US export controls in regards to chips. When asked about this legislation and the impact it might have on the financial outlook for ASML Holding N.V. (NASDAQ:ASML), CFO Roger Dassen had said in April that it was too early to guess how that would turn out. Dassen also pointed out that capacity lost in one region would mean someone else raises their hand and says that I am going to build more capacity than I originally planned to. He also added that the need for capacity remained, particularly in a world that was currently being characterized by undersupply.
There is some truth to the comments made by Dassen. For example, high-performance computing, the buildout of sovereign semiconductor foundries in the US and Europe, subsidized by the CHIPS Act, and the relentless demand for AI servers mean chipmakers are locked into long-term capital expenditure cycles. Companies like TSM, Intel, Samsung, Micron, and SK Hynix have all been rushing to add capacity to cater to the undersupply of memory chips. Plans by Elon Musk, the richest man in the world, to launch TeraFab, a semiconductor fabrication plant jointly developed by Tesla, SpaceX, and Intel, could further demand for ASML machines.
The Latest Earnings
The question remains, though, whether ASML Holding N.V. (NASDAQ:ASML) is overvalued or a bargain at 45x forward earnings? Investors should take a closer look at the latest earning numbers to help shed more light on this query. In the second quarter of 2026, the company posted earnings per share of €7.59, beating estimates by €0.60. The revenue over the period was €9.33 billion, up over 21% compared to the revenue over the same period last year and topping forecasts by €400 million. The firm also increased the outlook, saying it expects 2026 total net sales to be between €43 billion and €45 billion, with a gross margin of 54% to 56%.
ASML Holding N.V. (NASDAQ:ASML) said it intended to expand capacity by nearly 30% per year in the next two years for the flagship EUV tools it markets, though CEO Fouquet clarified that nearly all of the expanded EUV capacity through 2027 was already fully booked. It plans to similarly ramp up capacity for DUV tools, which are needed for less advanced chips and by customers in China. During the second quarter earnings call, Fouquet also told investors that ASML expects the revenue for advanced foundry logic this year to increase by about 25% and revenue on memory this year to increase by 75%.
ASML Holding N.V. (NASDAQ:ASML) CFO Roger Dassen told the media following the earnings release that the capacity expansion takes into account the needs of new customer Terafab, which Elon Musk is building in Texas to supply chips to SpaceX and Tesla. This admission is important because Terafab has a goal of a terawatt of annual compute by consolidating fabrication under one roof. This translates directly to high-margin High-NA EUV purchase orders from Intel, their manufacturing partner. Fouquet has confirmed Intel will use new High-NA tools from ASML to make advanced Panther Lake chips.
During the second quarter, ASML Holding N.V. (NASDAQ:ASML) brought in €5.6 billion in net bookings – new orders added to the backlog. This represents a solid recovery from previous quarters, heavily driven by strong demand for both standard 0.33 NA EUV systems and the initial commercial shipments of High-NA (0.55 NA) systems. Out of that €5.6 billion in new bookings, €2.5 billion was for EUV systems. This lays to rest worries about the high cost of the latest EUV systems and whether ASML customers would continue to use multi-patterning techniques to delay the cost of High-NA EUV adoption.
For data-driven traders, the €40 billion backlog is the ultimate security blanket. At the current annual revenue run-rate of roughly €28 billion to €30 billion for ASML, this backlog represents nearly 1.5 years of completely guaranteed, locked-in future revenue. Even if geopolitical tensions, like the proposed MATCH Act, temporarily freeze new sales or service agreements in China, this massive, non-China backlog, fueled by subsidized foundry buildouts from TSM, Intel, and Samsung in the US and Europe, as well as the fab buildout by Terafab, provides a highly defensive floor for the valuation of the biggest company in Europe.
The Smart Money Factor
For retail investors, one tried and tested ‘shortcut’ to avoiding all this tedious research is simply following the smart money. At Insider Monkey, we strive to provide the complete picture for our readers. In addition to the fundamentals highlighted above, we maintain a proprietary database of over 1,000 elite hedge funds and their stock trading activities. Per the numbers we crunched, ASML Holding N.V. (NASDAQ:ASML) saw a flurry of hedge fund activity in the first three months of 2026. 133 top hedge funds in our database hold a stake in the company as of the end of March this year, up from 101 at the end of the fourth quarter of 2025.
Since we started tracking hedge fund activity back in 2013, this is the highest number of hedge funds with a position in ASML Holding N.V. (NASDAQ:ASML), beating the previous record of 101 held at the end of December 2025. The largest shareholder is Fisher Asset Management with a stake worth over $6 billion, closely followed by Arrowstreet Capital with a stake worth $2.1 billion. Both these funds have made minor additions to their stake in the first three months of the year, compared to 13F filings for the previous quarter. Notably, Citadel Investment Group has PUT options on the stock worth over $1.5 billion.
While we acknowledge the risk and potential of ASML as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ASML and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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