ASML: A Chipmaker’s Tale

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Now, gather ’round, if you will, and let me tell you a story. It’s a tale of gears and glass, of tiny things made mighty, and of a company called ASML. Seems these days everything runs on these little silicon slivers they call chips, and ASML, bless their Dutch ingenuity, makes the machines that make the chips. They’re the blacksmiths of the information age, only instead of horseshoes, they’re forging the future… and charging a handsome price for the privilege, I might add.

For the last year or so, with this here “artificial intelligence” causing a right commotion, ASML’s been doing rather well for itself. Shares have climbed higher than a Mississippi steamboat on a spring flood, and they’ve more than doubled in value over the last five years. A tidy sum, wouldn’t you say? But the question isn’t where they have been, but where they’re headed. Will this AI craze keep the coffers overflowing, or is it just another bubble waiting to burst?

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The Shrinking World of Transistors

You see, ASML doesn’t make the chips themselves. They make the machines that etch these intricate circuits onto the silicon, and they’ve got a knack for making them smaller than a gnat’s whisker. These machines, they use something called “lithography,” which is a fancy way of saying they shine light through a stencil to print the circuits. And ASML, they’re the only ones who’ve truly mastered the art of making these stencils small enough to create chips with transistors packed closer together than a crowd at a revival meeting.

Now, the closer you pack those transistors, the more powerful and efficient the chip becomes. That’s why companies like Nvidia – makers of the brains behind much of this AI hullabaloo – are so reliant on ASML. Without these machines, building the data centers needed to power all this artificial intelligence would be… well, nigh impossible. It’s a bit like trying to build a cathedral with nothing but a butter knife and a prayer.

And with new chip factories sprouting up all over the globe – in Japan, the United States, Europe, and especially Taiwan – the demand for ASML’s machines is only going to increase. They’ve got a monopoly on this technology, you see, and monopolies, well, they tend to be profitable. Their revenue has doubled in the last five years, and they’re selling these machines – and the services to keep them running – for a king’s ransom. It’s a good business, if you can get it.

Five Years Down the Road

ASML isn’t resting on its laurels, either. They’re constantly tinkering and innovating, pushing the boundaries of what’s possible. They recently announced a new process that will allow manufacturers to produce 50% more chips per hour. More chips, faster, cheaper… it’s a beautiful thing, if you’re a chipmaker. It gives them significant pricing power, you see, and allows them to charge even more for their machines and services. It’s a bit like selling gold in a gold rush – you can name your price.

If things continue at this pace, we could see ASML’s revenue double again in the next five years, from $37 billion to $75 billion. With a healthy operating margin of around 35%, that would translate to over $26 billion in operating earnings. A considerable sum, wouldn’t you say? Enough to make even a Wall Street banker blush.

But here’s the rub. ASML’s current market capitalization is a staggering $580 billion, which means investors are already paying 22 times those future earnings. That’s a mighty high price to pay for anything, even a company as dominant as ASML. While it’s a great business and will likely be much larger five years from now, there’s a risk that the stock price won’t keep climbing at the same rate. Sometimes, the best investments are the ones you don’t make, at least not right away.

It might be best to sit tight for a while, let the dust settle, and wait for a better opportunity to add ASML to your portfolio. Patience, my friends, is a virtue, especially when dealing with the whims of the market. And remember, a fool and his money are soon parted.

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2026-02-26 16:23