The strong performance of the USA stock market is closely linked to chip design company NVIDIA (NVDA.O), which plays a core role in the investment boom in AI. NVIDIA heavily relies on Taiwan Semiconductor (TSM.N), the world's most advanced chip manufacturer. Taiwan Semiconductor's achievements in cutting-edge chip manufacturing depend on ASML Holding (ASML.O), the leader in lithography equipment, whose technology prints extremely high-density patterns on silicon wafers using lasers and mirrors.

Over the past decade, NVIDIA, Taiwan Semiconductor, and ASML have created immense returns for investors: NVIDIA's stock ROI reached an astonishing 29,000%, Taiwan Semiconductor grew by 1,100%, while ASML increased by 800%. However, unlike NVIDIA and Taiwan Semiconductor, which are near historical highs, ASML's stock price has dropped nearly one-third from last summer's peak after it lowered its revenue guidance in October 2024.

Does this mean that the chip industry, and even the USA stock market, is facing a warning? Or is ASML losing its monopoly on high-end lithography technology? Neither is true. In fact, ASML is expected to rebound.

ASML's EUV (Extreme Ultraviolet) machines are the pinnacle of modern technology, with devices utilizing lasers to hit molten tin droplets up to 50,000 times per second, without a single failure. The complexity of this technology has been achieved after decades of research and development. ASML's current devices can print at a resolution of 13 nanometers, while the next generation of High NA EUV devices will further enhance this to 8 nanometer resolution and support 2 nanometer chip process nodes. These devices are expected to cost as much as $0.38 billion to $0.4 billion each, with potential customers including Intel (INTC.O) and Apple (AAPL.O).

ASML's current market dilemma mainly includes three points:

Fluctuating demand in the China market: China hoarded low-end ASML devices due to concerns over stricter trade restrictions, followed by a sudden drop in demand.

Challenges for Intel: Intel is trying to expand its chip manufacturing capacity, but its current financial performance is poor, and order delays have impacted ASML.

Weak consumer market: Although there is strong growth in the AI sector, the demand for chips in Consumer Electronics has declined, dragging down the overall market performance.

Despite facing short-term pressures, ASML's long-term growth potential remains promising. With the widespread adoption of 2-nanometer processes and increased EUV demand from Memory Chips, the company's revenue growth is expected to recover. Bank of America Securities Analyst Didier Scemama predicts that ASML's average annual compound growth rate will reach 16% over the next five years.

ASML's current PE ratio is 37 times, which is not low, but compared to its premium level among USA chip equipment companies over the past decade, this valuation is close to historical lows. Analysts' optimistic Target Price for ASML suggests that its stock price may have 26% upside potential.

ASML's CSI Leading Technology Index in the Lithography field, along with its irreplaceable role in chip manufacturing, makes it a significant beneficiary of the future recovery in the Industry. Despite short-term challenges, ASML's growth prospects remain bright, and investors may seize this opportunity.