ASML: ASML Owns the Machines that make AI Chips

ASML has no competition in extreme ultraviolet lithography. Every chipmaker building processors at 7nm or smaller, TSMC, Intel, Samsung, must buy from ASML. This monopoly delivers pricing power: EUV system prices rise roughly 10% annually, and customers cannot switch suppliers. As AI and high-performance computing push demand toward cutting-edge nodes, ASML captures the full profit from every foundry expansion at advanced process technologies.

ASML holds €33 billion in committed orders as of Q3 2025, representing roughly one year of revenue visibility. Foundries pre-order machines years ahead because capacity is constrained and lead times stretch 18–24 months. This backlog insulates ASML from short-term chip cycle volatility and ensures steady revenue even during demand slowdowns. As High-NA systems ramp in 2026–2027, average selling prices will rise further, lifting both revenue and gross margins above current 51% levels.

TSMC plans $38-42 billion in 2025 capital spending, with 70% targeting advanced nodes where ASML's EUV systems dominate. AI chip production, training accelerators and inference processors, requires the transistor density only EUV can deliver. As hyperscalers expand data center infrastructure and automakers adopt advanced compute, foundry customers must add capacity. ASML benefits directly: each new fab at 3nm or below needs multiple EUV tools, translating AI infrastructure spending into predictable equipment demand for ASML.

High-NA shipment acceleration: ASML plans to ship at least five High-NA systems in 2025, with Intel and Samsung as early adopters. Each system costs €350 million, and successful installations prove technical readiness for 2nm production. If customers accelerate orders beyond five units or announce earlier-than-expected volume production timelines, it validates pricing power and pulls forward revenue previously expected in 2027–2028.

Intel 18A and TSMC 2nm demand for High-NA: Intel's 18A node targets 2026 production readiness, requiring multiple High-NA tools for Clearwater Forest servers and Panther Lake clients. TSMC begins 2nm volume production in late 2026, initially using standard EUV with multi-patterning but potentially adopting High-NA by 2027–2028 if yields improve. Successful ramps by either foundry translate into sustained EUV tool demand, supporting ASML's revenue growth and margin expansion as High-NA systems scale.

1nm and beyond node transitions: Semiconductor roadmaps extend to 1nm by 2028–2030 and sub-1nm angstrom nodes by 2032–2035, driven by AI model scaling, data center compute density, and automotive autonomy requirements. Each node transition below 2nm requires additional High-NA or next-generation Hyper-NA tools, locking ASML into a perpetual upgrade cycle. As chipmakers pursue Moore's Law economics through extreme transistor density, ASML remains the sole enabler, ensuring secular demand growth independent of unit volume cycles.

China represented roughly 29% of ASML sales in 2024, but export restrictions imposed by the U.S. and Netherlands limit shipments of advanced DUV and all EUV systems to Chinese fabs. Sales to China are expected to decline further in 2026 as licenses tighten and domestic chipmakers slow capacity additions. If geopolitical tensions escalate or outright bans expand, ASML loses a significant revenue stream with limited ability to redirect production, pressuring near-term growth and forcing greater reliance on TSMC, Intel, and Samsung orders.

TSMC is not planning to use High-NA EUV until at least 2029, choosing instead to extend current EUV tools with multi-patterning to avoid the $350–400 million cost per machine. Intel adopted early but faces foundry losses, raising doubts about return on investment. Samsung has not committed and may wait for next-generation Hyper-NA tools around 2030. If adoption lags, ASML's revenue growth slows and average selling prices remain flat, delaying the margin expansion investors expect from the High-NA transition.

Semiconductor equipment spending is cyclical. Intel cut 2025 capex by 20%, Samsung by 11%, reflecting demand uncertainty and tariff concerns. If chip demand softens, due to recession, oversupply, or slower AI infrastructure spending, foundries postpone tool purchases immediately. ASML's backlog provides near-term cushion, but sustained capex declines reduce order intake, compress margins as fixed costs spread over fewer units, and push out revenue recovery until the next upcycle, making timing and entry critical for investors.