The "Invisible Champion" in the semiconductor industry—Why I haven't bought ASML but keep watching

ASML is the stock I respect the most on Gate. It manufactures lithography machines, which are upstream in chip manufacturing. It’s the only company in the world capable of producing extreme ultraviolet (EUV) lithography machines, and TSMC, Samsung, Intel all rely on it. This monopoly position is even stronger than NVIDIA’s.

So why haven't I bought it? Three reasons: too expensive, too slow, I don’t understand.

First, too expensive. ASML’s price-to-earnings ratio has been consistently around 35-40 times, with the stock price at several thousand dollars per share (Gate supports fractional shares, so I can buy it, but I feel it’s expensive). Although its monopoly status justifies this valuation, the margin of error is very low. If there’s a change in technology (such as breakthroughs in nanoimprint or electron beam lithography), ASML’s position could be shaken. The probability is small, but if it happens, it would be devastating.

Second, too slow. ASML’s performance growth is very stable, about 15% annualized, but rarely explosive. Because its equipment delivery cycle is long, order visibility is high, but that also means a lack of surprises. For small funds, 15% annual growth isn’t as attractive as seeking faster-growing targets.

Third, I don’t understand. Lithography machines are extremely specialized. I can understand revenue and profit from financial reports, but I can’t judge whether the technology route will be disrupted. That’s beyond my skill set. For an amateur investor to buy ASML is essentially no different from gambling.

So I choose not to buy, but I will keep observing. Every time ASML reports strong earnings, I check its backlog and customer distribution. If one day I find I can understand this industry, or if the valuation drops enough (like PE 20), I might buy a little. But until then, I am just an observer.

The depth of ASML on Gate is very good, with tight bid-ask spreads. This is a sign of a mature market. But maturity doesn’t mean it’s suitable for everyone.

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