ASML Stock Split Looming as AI Chip Demand Soars

ASML Holding (ASML) reported record quarterly sales in its third-quarter earnings announcement on Oct. 14, driven by continued strength in AI investments and customer demand for its advanced chipmaking equipment. The company is the world's only commercial supplier of extreme ultraviolet (EUV) lithography machines, which are essential for manufacturing the most advanced semiconductors.

ASML's customers include chip industry heavyweights like Taiwan Semiconductor Manufacturing (TSM), Samsung, and Intel (INTC). The company has a history of stock splits, having completed three in its earlier years: a 2-for-1 split in 1997, another 2-for-1 in 1998, and a 3-for-1 in 2000. With its share price now around $1,550 and strong growth prospects, another split could be on the table.

Management noted that current supply plans for 2027 and 2028 will not be sufficient to meet expected customer demand, with some customers already expressing interest in orders for deliveries as far out as 2029 and 2030. This indicates robust long-term demand for ASML's equipment.

Additionally, ASML's next-generation High Numerical Aperture (High NA) EUV lithography technology is moving beyond experimentation. Early adopter Intel has already processed more than 1 million wafers using the technology, while Samsung and SK Hynix plan to introduce it into memory production starting in 2028, and TSMC intends to use it in high-volume manufacturing starting in 2030.

Despite these positives, ASML faces risks including the cyclical nature of the chip industry, geopolitical restrictions and export controls (especially to China), and reliance on highly specialized supply chains.

A stock split does not change a company's fundamentals, but it can make shares more accessible to retail investors and often signals management's confidence in future growth. For ASML, a split could attract a broader investor base and increase liquidity, potentially boosting the stock price.

ASML's monopoly in EUV lithography gives it a critical role in the AI supply chain. As AI continues to drive demand for more powerful chips, ASML's equipment is indispensable. The company's growing backlog and customer interest extending to 2029-2030 underscore the durability of its growth.

The adoption of High NA EUV technology by multiple major chipmakers diversifies ASML's customer base and reduces dependence on any single customer or application. This next-generation technology could extend ASML's competitive advantages and drive future revenue growth.

However, investors should be mindful of the risks. The semiconductor industry is cyclical, and a slowdown in AI spending could lead to delayed expansion plans and reduced demand for ASML's expensive equipment. Geopolitical tensions and export controls, particularly regarding China, remain ongoing headwinds.

Valuation-wise, ASML trades at a forward P/E of about 23, which is reasonable given its competitive moat and long-term growth opportunities. Analysts are overwhelmingly bullish, with an average 12-month price target above $2,100, implying significant upside from current levels.