Lately, I’ve been noticing the AI frenzy heating up even more, and that’s exactly why today I want to talk about ASML..
Today I want to discuss something that sounds technical, but in reality is the “hidden gateway” to future returns in the semiconductor industry.
So forget Nvidia’s AI chips for a moment, and let’s take a closer look at what’s happening inside ASML’s “laboratory.”
THE STORY MOST PEOPLE DON’T KNOW
Imagine having the best bricks in the world, the chips themselves. But if you don’t know how to properly connect them together to build a house, then what’s the point?
Until now, most of the attention went to lithography, meaning the process of “drawing” circuits onto silicon. But as chips become smaller and smaller, we’re starting to hit a wall. And the solution? Advanced Packaging.
Instead of building one giant chip, companies are now taking multiple smaller chips and stacking them on top of each other like a multi-story building.
And according to current estimates, this is one of the sectors expected to grow massively over the coming years.
Think about it this way: without proper Advanced Packaging, the next iPhone or the processor powering ChatGPT-5 simply couldn’t be manufactured economically. ASML understood this early and, instead of relying only on cutting-edge EUV systems, introduced the Twinscan XT:260.
And here’s the irony. It uses a technology considered “ancient” in the industry called i-line lithography. Why? Because when it comes to “stitching” chips together, companies don’t necessarily need $350 million EUV machines. What they really need is extreme alignment precision.
The problem ASML is solving here is wafer warpage. Wafers may look perfectly flat to us, but in reality they bend ever so slightly.
And if you try stacking them with even the tiniest tilt, the chip becomes useless. Together with Carl Zeiss, ASML developed an optical system capable of detecting and correcting these microscopic imperfections.
WHAT DOES THIS MEAN FOR INVESTORS?
Personally, I wouldn’t expect ASML’s revenue to explode overnight from this specific machine alone.
Advanced Packaging is still a relatively small piece of the overall business.
However, projections suggest that the second half of 2026 and 2027 could bring a major acceleration in revenue growth. And what I find interesting is that ASML isn’t simply waiting for industry trends to unfold. The company is actively building the infrastructure to become an essential middleman in chip packaging as well.
Analysts are also expecting meaningful improvements in profit margins, which are already considered exceptionally strong.
“Okay, sounds great, but what does this mean for us as investors?”
INVESTMENT PERSPECTIVE
Over the past few months, I’ve watched shares of the so-called “Fab Five” companies, like ASML and Applied Materials, massively outperform the broader market. Wall Street is finally starting to fully appreciate the value and moat these businesses have built.
As for ASML’s stock itself, it has absolutely skyrocketed over the last year, gaining 97.8%.
That rally pushed the company’s valuation much higher, with the stock now trading at a forward P/E of 32.6, compared to its 3-year average of 28.
At the same time, ASML continues returning more and more capital to shareholders through both share buybacks and dividends.
Overall, analysts remain optimistic about ASML, especially ahead of the major industry heat-up expected in the second half of 2026 and throughout 2027. And honestly, I think the market increasingly sees ASML as a company that doesn’t just react to the future, but actively shapes it. As long-term investors, I personally prefer owning the leader that gets paid no matter who wins the AI war.
In my opinion, ASML remains a top-quality company that I’ll definitely continue watching closely going forward.
As always, I keep focusing on fundamentals. Because where most people simply see machines, I see the infrastructure of the future.
