Chip stocks are soaring Nvidia (NVDA) surged after the company beat profit expectations and delivered what many experts quickly deemed a sign of the times.
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The move adds to the recent craze for AI-based technologies and equities that offer huge growth potential.
ASML Named to the IBD Big Cap 20 list and the current leader of IBD’s Semiconductor Equipment Group, (ASML) offers a great buying opportunity for companies looking to capitalize on the growth trend of AI.
Based in the Netherlands, ASML manufactures lithography, metrology and inspection systems for memory and logic chip manufacturers. Clients include celebrities such as: intel (INTL), Samsung, taiwan semiconductor (TSM).
ASML Stocks Pop On Demand Outlook
Nvidia’s rosy prospects are particularly attractive for ASML, as Nvidia doesn’t actually make its own chips. Because we rely on Taiwan Semiconductor, Taiwan Semiconductor also needs his ASML. Therefore, Thursday’s rally in ASML shares should not come as a surprise.
The move made even more sense as it moved ASML back into the buy zone and re-passed the Handled Cup-based 683.28 buy point that it first passed on May 18.
ASML is the perfect fit for your exponential growth story.
The company expects net sales to grow 25% this year. After reporting earnings of $15.13 per share last year, EPS is estimated to increase to $20.39 and $24.50 in 2023 and 2024, respectively. Nvidia’s findings may further revise this guidance.
As with any sector experiencing hype, investors should be cautious. While it is clear that AI will drive some productivity gains, the question is whether current valuations are too optimistic or too pessimistic for future growth.
ASML stocks Low volatility AI strategy
Nonetheless, for investors looking to step into a hot industry, ASML is a lower risk bet than many of its more popular peers.
For comparison, NVIDIA and Advanced Micro Devices (AMD) had year-to-date volatility of 59% and 53%, respectively. ASML shares are just 43% volatile.
In addition, ASML’s lithography systems have strong competitive advantages over their competitors, giving them unrivaled control over product pricing.
If demand for chips remains strong, it could lead to a surge in the company’s profits. But if rising interest rates and a global recession take hold, leading to lower chip demand, the gains could quickly reverse.
ASML shares boast an IBD-best overall rating of 99 and an EPS rating of 95. The stock is currently trading in the buy zone, with relative strength returning to new highs.
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