ASML Holding N.V. ASML has seen its share price soar more than 17% over the past month. This surge has significantly outperformed the S&P 500 index, which gained 12.1% during the same period.Zacks Investment Research

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This outperformance raises the question: Should investors accumulate ASML shares or book profits and exit the investment?

What Drove ASML Stock Higher?

ASML Holding’s recent rally stemmed from broader market optimism. Progress in U.S.-China trade negotiations has been boosting market sentiment since late April. Protracted trade tensions had previously dampened global economic forecasts and corporate earnings expectations due to tariffs and retaliatory measures.

Last week, the United States and China reached a deal to slash tariffs temporarily. The United States has agreed to lower its overall tariffs on Chinese imports to 30% from 145%. On the other hand, China will reduce duties on U.S. imports to 10% from 125%. The new adjustments will be effective for 90 days.

The recent trade deal suggests easing tensions between the two largest economies and smoother international trade flows. This improved outlook fostered investor confidence, leading to a rally in the equity market as fears of further economic disruption subsided and prospects for global growth seemed brighter.

Apart from ASML Holding, this broader market optimism also boosted share prices of other semiconductor players, including Lam Research LRCX, KLA Corporation KLAC and Applied Materials AMAT. Over the past month, shares of Lam Research, KLA Corporation and Applied Materials have soared 32.5%, 24% and 19.6%, respectively.

ASML Holding’s long-term growth potential and invigorated investor optimism make the stock worth buying.

ASML’s Technological Leadership Ensures Bright Prospects

ASML’s dominance in the semiconductor manufacturing sector is unchallenged. The company maintains a near-monopoly on extreme ultraviolet (EUV) lithography, which is essential for producing advanced chips at 3nm and below. Its EUV systems are crucial for leading chipmakers such as TSMC, Samsung and Intel, positioning ASML as a key enabler of cutting-edge semiconductor manufacturing.

ASML Holding’s High-NA EUV technology represents the next frontier in chip manufacturing. Designed for sub-2nm nodes, these advanced systems will be critical for the industry’s future. While the adoption of High-NA EUV has been slower than expected, the long-term potential remains enormous. As chipmakers ramp up production of smaller, more powerful chips, ASML’s High-NA EUV tools will play a pivotal role, driving sustained demand.

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The company’s technological superiority ensures high barriers to entry, giving it a competitive moat. With EUV technology being essential for advanced semiconductor fabrication, ASML Holding’s dominance remains intact, supporting its long-term growth outlook.

AI Boom to Fuel ASML Holding’s Growth

ASML Holding is well-positioned to capitalize on the artificial intelligence (AI) revolution, which is driving massive demand for advanced semiconductors. With AI workloads requiring cutting-edge GPUs, high-bandwidth memory and AI accelerators, the demand for smaller and more powerful chips is rising. This trend plays directly into ASML’s hands, as its EUV and High-NA EUV machines are vital for manufacturing these advanced chips.

As cloud providers, data centers and tech giants expand their AI infrastructure, ASML Holding’s lithography tools will be in greater demand. This AI-driven semiconductor expansion ensures long-term growth tailwinds for ASML, making it a compelling buy.

ASML’s Strong Financials Despite Challenges

ASML Holding’s first-quarter 2025 financial results demonstrated its resilience amid the ongoing macroeconomic uncertainties. The company posted €7.74 billion in net sales, marking a 46% year-over-year increase. Net income surged 92% to €2.36 billion, while earnings per share (EPS) grew 93% to €6.00, highlighting ASML’s operational efficiency.

ASML Holding N.V. Price, Consensus and EPS SurpriseASML Holding N.V. Price, Consensus and EPS Surprise

ASML Holding N.V. price-consensus-eps-surprise-chart | ASML Holding N.V. Quote

The gross margin expanded 300 basis points year over year to 54%, driven by strong cost management and improved productivity in its advanced lithography systems. This margin expansion reflects ASML’s ability to maintain profitability even in a challenging macro environment.

ASML Holding’s 2025 guidance also signals confidence in its future growth. The company expects 15% revenue growth for the year, driven by the rising demand for both EUV and DUV (deep ultraviolet) lithography systems. Additionally, ASML forecasts a 70-basis-point margin expansion in 2025, indicating higher profitability ahead.

Premium Valuation Justifies ASML’s Technological Dominance

ASML stock currently trades at a premium to the Zacks Computer and Technology sector. Its forward 12-month price-to-earnings (P/E) ratio of 26.2 exceeds the sector’s average of 25.5. However, the company’s near-monopoly in EUV lithography and strong growth prospects justify this premium valuation.Zacks Investment Research

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ASML Holding also trades at higher P/E multiples compared with other semiconductor players, including KLA Corporation, Lam Research and Applied Materials. Currently, KLA Corporation, Lam Research and Applied Materials trade at P/E multiples of 24.1X, 21.25X and 17.09X, respectively.

Conclusion: Buy ASML Stock for Now

ASML Holding’s technological leadership and robust financials offer strong long-term growth potential. The company’s dominance in EUV and High-NA EUV technology makes it well-positioned for future growth. With rising demand for advanced nodes, AI chips and high-bandwidth memory, ASML’s lithography tools will remain mission-critical, making the stock worth buying.

ASML carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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