ASML Stock Split Watch: Is a 10-for-1 Split Coming?

ASML Holding (ASML) is a critical player in the semiconductor industry, but its stock has lagged the broader sector over the past three years. While the PHLX Semiconductor Sector index jumped 247%, ASML shares rose 189%. Now, with each share trading above $1,600, there's growing speculation that management could initiate a forward stock split to make the stock more accessible to retail investors.

A forward split, such as 10-for-1, would increase the number of shares outstanding while proportionally reducing the price per share. For example, a 10-for-1 split would bring ASML's share price down to just over $160. While this doesn't change the company's fundamentals, it could boost demand by making the stock more affordable for a wider pool of investors.

However, many brokerages now offer fractional shares, so investors can already buy ASML regardless of a split. The real driver for ASML is the AI-fueled demand for advanced chips, which is boosting demand for its chipmaking equipment.

In the third quarter, ASML reported revenue of €11.66 billion, up 55% year over year, with 113 new lithography systems sold, up from 66 a year earlier. These EUV machines are essential for printing advanced AI chips. Management expects €14.7 billion in revenue for the current quarter, implying 51% growth, and plans to increase capacity by 30% in 2027, with further increases possible in 2028 and beyond. Customers are already placing orders for 2029 and 2030, indicating sustained demand.

A stock split is largely a cosmetic move, but it can have a psychological impact. A lower share price might attract retail investors who are deterred by ASML's high price tag. This could increase liquidity and potentially drive the stock price higher in the short term. Given ASML's underperformance relative to the semiconductor sector, a split could be a catalyst to narrow the gap.

However, the more important factor is ASML's underlying business. The company is a monopoly in EUV lithography, which is essential for manufacturing the most advanced semiconductors used in AI applications. The AI boom is driving demand for these chips, and ASML is a key beneficiary. The strong Q3 results and optimistic guidance reflect this.

Moreover, ASML's earnings estimates have been rising, and analysts are increasingly bullish on its long-term growth prospects. The stock currently trades at 27 times forward earnings, a discount to its five-year average of 33. This suggests that the market may not have fully priced in the growth potential.

For investors, the potential stock split is a nice-to-have, but the real reason to own ASML is its dominant position in a critical industry and the secular tailwinds from AI. Whether or not a split happens, the fundamentals support a higher stock price over time.