This article first appeared on GuruFocus.
ASML Holding (NASDAQ:ASML), the world's only supplier of extreme-ultraviolet lithography machines, rallied with European chip stocks Thursdaythen the buyers vanished in New York. The ADR soared to $1,780.87 before sliding to $1,732.41, down approximately 0.8% and nearly $48.50 below its intraday high. The AI excitement arrived fast. The valuation reality arrived faster.
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The growth engine is hardly sputtering. Second-quarter sales reached 9.326 billion as gross margin hit 54%. Management expects third-quarter revenue of 11 billion to 12 billion, putting the 11.5 billion midpoint roughly 23.3% above the latest quarter. ASML also plans to boost 2027 low-NA EUV capacity by about 30% and is already considering another increase for 2028. Demand is not the problem.
Price is. At $1,732.41, ASML trades 38.62% above its GF Value estimate of roughly $1,250. Nvidia's long-range forecast gives chipmakers another reason to expand capacity, but investors have already priced in plenty of that upside. ASML must now ship more machines, defend margins and keep its sprawling supplier network moving perfectly. AI can remain red-hot while an expensive stock still cools.
