Without us, there is no AI. That’s the pitch from semiconductor supplier ASML (NASDAQ:ASML). If you haven’t heard of this Dutch company, that’s probably because it builds machines that print microchips onto silicon wafers using ultraviolet light. (We don’t blame you if you didn’t understand that.)

ASML supplies hardware to major chipmakers like TSMC, Intel, and Samsung — who manufacture chips designed by Nvidia, Apple, and AMD. Shockingly, the Dutch firm has virtually no competition. Its ubiquity has sent its stock up over 400% in the past five years as chipmaking giants race to upgrade facilities to capitalize on the surging demand from tech companies.

The only game in town: To accommodate the rapid growth of artificial intelligence (AI), ASML has created a cutting-edge $380M, 165-ton machine designed to manufacture higher-performance chips — which its CEO said will be necessary to meet the “massive amounts of computing power and data storage” required to power AI. And without ASML, it’s “not going to happen” (WSJ).

• The new tool can fit 3x more transistors on chips up to 1.7x smaller than its predecessors.
• Last quarter, ASML experienced record orders of $10B as customers lined up to acquire its state-of-the-art technology.

2024 could be mid. Instead, look forward to 2025.

ASML’s machines have become a hot topic in the tenuous relationship between the US and China. Since 2019, US officials have pressured ASML to cancel shipments to China, citing concerns about China’s ambitions to develop its semiconductor industry. These tensions escalated when the Netherlands pulled ASML’s license to export high-end equipment to China.

• Despite these challenges, ASML saw a surge in sales to China as Chinese companies rushed to secure its products before any potential export bans.
• This led to a significant increase in ASML’s sales from China, from 8% in the first quarter of 2023 to 39% by the fourth quarter (BBG).

Back to normal: Curtailing its Chinese exports will have a 10-15% impact on the company’s sales this year, contributing to flat growth in 2024. However, the company forecasts a chip boom in 2025 — boosted by an economic recovery, an upgrade cycle among chipmakers, and an increase in its own production output.