AI Boom Expected to Swell Orders Received by ASML

ASML, the leading equipment supplier of lithography machines needed for the manufacture of semiconductors, is set to record a significant increase in its orders after its second-quarter results are announced. This comes as the demand for artificial intelligence (AI) chips continues to increase.

Lithography machines are tools that use lasers to create the circuitry of computer chips. ASML is the only manufacturer of lithography systems using extreme ultraviolet wavelengths to manufacture chips for artificial intelligence and smartphones.

Kevin Wang, a Mihuzo analyst, expects that ASML’s new orders will be valued at close to five billion euros ($5.5 billion) in the second quarter. Analysts also expect the company to upgrade its guidance as manufacturers of advanced chips, such as TSMC, which makes chips for Nvidia, and report its earnings shortly after. This, they posit, may accelerate and increase equipment purchases.

These second-quarter results are the first be announced under Christophe Fouquet, ASML’s new CEO, who took over from Peter Wennink in April 2024. Wennink led the company for 10 years, transforming it into the biggest manufacturer of semiconductor equipment in Europe.

ASML is valued at $437 billion, which equates to roughly 400 billion euros. The company regards 2024 as a transition year and expects business to be slow before it rebounds in 2025, driven by rising demand for its advanced offerings.

Its shares are trading at more than 1,000 euros, having risen by 45% thus far into the year. Following a weak first half of the year, more orders would reassure investors that demand for the company’s advanced products is rebounding.

Sixteen analysts expect that ASML’s revenue in the second quarter will hit 6.04 billion euros ($6.56 billion) while net income will reach 1.4 billion euros ($1.53 billion). Their forecast is based on LSEG data and compares with the 6.90 billion euros in revenue and 1.94 billion euros in net income that the company generated in the first half of 2023.

While it works to keep up with new demand, ASML competes with Nikon and Canon of Japan, with Chinese companies such as Shanghai Micro Electronics Equipment also working to develop lithography tools. In the last year, chip manufacturers in China have significantly increased their older ASML equipment purchases. These chipmakers are hindered from acquiring ASML’s best offerings by export restrictions led by the United States.

The significant increase in older equipment purchases has seen companies outside China lose some of their market share while also seeing increased competition between them and Chinese companies.

The surge in the demand for AI chips can clearly be understand given the rate at which thousands of companies, including Alphabet Inc. (NASDAQ: GOOGL) (NASDAQ: GOOG), are coming up with new AI solutions to incorporate into their products.

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