The ASML Holding Semiconductor Company logo displayed on the smartphone. ASML is a Dutch company and is currently the world’s largest supplier of lithography systems for the semiconductor industry. (
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LONDON – According to two technology investors, the market value of ASML, a Dutch company that makes high-tech machines for semiconductor manufacturing, will climb from US$302 billion to more than US$500 billion next year.
Nathan Benaich, founder and general partner of boutique venture capital firm Air Street Capital, and Ian Hogarth, who sold his artificial intelligence startup Songkick to Warner Music Group, wrote in the annual “State of Artificial Intelligence” report on Tuesday that Europe’s largest Technology companies are little-known “keys” in the global semiconductor industry.
ASML was established in 1984 to provide chip manufacturers with the necessary hardware, software, and services to mass-produce patterns on silicon using a method called photolithography.
It is the only company in the world that provides extreme ultraviolet lithography machines such as TSMC and other manufacturers required to manufacture the smallest and most complex chips.
Each EUV machine has more than 100,000 parts at a cost of US$150 million. They are transported in 40 freight containers or four jumbo jets.
Narrowing the gap
Hogarth told CNBC that after the coronavirus pandemic caused a global chip shortage, the stock prices of several chip companies have soared, but Asim’s stock price still has some room to rise.
He said that the market value of ASML is different from the scale of companies such as Nvidia or TSMC, because it is in Europe, the market value of high-tech companies is slightly lower, and its technology is more behind the scenes.
Nvidia’s current valuation is 521 billion U.S. dollars, while TSMC’s valuation is 533 billion U.S. dollars.
“As people look for Alpha as they invest in this trend of semiconductors becoming more and more important to the global supply chain, this (ASML) feels like an obvious candidate,” Hogarth said.
ASML’s growth will be driven by the desire of certain countries to manufacture onshore chips and reduce their dependence on other countries. Currently, the vast majority of chips in the world are manufactured in Asia.
“If China is to build products equivalent to today’s TSMC or some leading American semiconductor companies, they will need to purchase a large number of these (EUV) machines,” Hogarth said. “Therefore, the more countries see this technology as part of their key sovereignty, the more machines they sell.”
Last month, ASML stated that it expects a sales boom in the next ten years. It believes that by 2025, annual revenue will reach EUR 2.4-30 billion (USD 2.8-35 billion) and gross profit margins will be as high as 54% to 56%. The forecast is significantly higher than the previous forecast of 1.5-24 billion euros. The company said: “We see significant growth opportunities beyond 2025,” adding that it expects annual revenue growth between 2020 and 2030 to reach about 11%.
ASML said that “global trends in the electronics industry” coupled with “high-margin and intensely innovative ecosystems” are expected to continue to drive the growth of the entire semiconductor market.
It added that the growth of the semiconductor market and “increase in lithography intensity” are driving demand for its products and services.
In the past 12 months, ASML’s share price on the Amsterdam Stock Exchange rose from 328 euros last Friday to 646 euros, reaching a peak of around 753 euros on September 23.
Not everyone is so optimistic
In a report to investors on September 28, analysts at New Street Research believed that “the semi-market value is expected to be very high” and that ASML’s upside in 2022 is “limited” because it “still restricts EUV supply.”
The company is optimistic about ASML’s five-year prospects, but has now “tactically” downgraded the stock to “neutral.”
Elsewhere, UBS also gave a neutral rating to Asimer’s stock. An analyst from this investment bank stated in a report to investors on September 29, “We still believe in the growth potential of Asimer in the medium term, but… it’s hard to see the growth from the 12-month period. From a point of view, the stock’s strong upside potential.”
Hogarth said that he believes analysts have ignored the “geopolitical dimension” and failed to recognize how much money countries have spent on establishing sovereignty in the semiconductor field.
Last year, Benaich and Hogarth predicted that Nvidia’s acquisition of British chip designer Arm would be blocked by regulators. Soon after making the prediction, regulators around the world announced a series of investigations into the transaction, which are still ongoing.
This year, they also predict that there will be an “integration wave” in the artificial intelligence semiconductor industry. “At least one of Graphcore, Cerebras, SambaNova, Groq or Mythic will be acquired by a large technology company or a major semiconductor company.”
They also believe that Alphabet’s DeepMind artificial intelligence laboratory will “make a major research breakthrough in the field of physical science.”
Disclaimer: Nathan Benaich personally holds ASML stock. Ian Hogarth didn’t.