To The Moon

$ASML Holding NV(ASML)$

Semiconductor leader ASML Holding is set to report its fiscal second-quarter results on July 16, 2025, and investors are eager to know: is now the time to buy?

In this analysis, we examine the company’s valuation, long-term capital efficiency, and positioning within the artificial intelligence (AI) supply chain. We’ll also weigh the impact of escalating tariffs and geopolitical risk, before offering a measured recommendation on how to approach ASML stock ahead of earnings.

A Decade of Superior Returns on Capital

One of the hallmarks of a high-quality business is its ability to consistently generate strong returns on invested capital (ROIC). ASML has excelled on this front.

Over the past decade, the company has steadily improved ROIC from 15.4% in 2016 to an impressive 24.3% over the trailing 12 months. This sustained growth underscores ASML’s ability to allocate capital efficiently and reinforces the durability of its competitive moat.

At the Core of the AI Supply Chain

ASML’s lithography systems are the linchpin of the semiconductor manufacturing process, making the company indispensable to the AI-driven data center buildout currently underway.

Tech giants like Microsoft, Amazon, Alphabet, and Meta Platforms are expected to spend hundreds of billions of dollars in 2025 alone to construct AI-optimized data centers. These facilities rely on Nvidia GPUs, which are manufactured by TSMC (Taiwan Semiconductor Manufacturing Company) using ASML’s cutting-edge equipment.

ASML also supplies leading-edge technology to Intel and Micron, as they expand fabrication capacity to capitalize on booming AI demand. The company’s extreme ultraviolet (EUV) lithography remains the most advanced in the world—at least two generations ahead of competitors—giving ASML considerable pricing power and enviable customer loyalty.

Recent management commentary suggests robust order pipelines, as clients invest tens of billions to upgrade production in anticipation of long-term AI-driven demand.

Decoding ASML’s Risk-Reward Profile for Investors

For investors evaluating ASML today, the story is one of remarkable competitive strength weighed against growing macro and geopolitical uncertainty.

On the reward side of the equation, ASML’s dominance in extreme ultraviolet (EUV) lithography remains unchallenged. The company sits at the heart of the semiconductor manufacturing ecosystem, supplying indispensable tools to chipmakers like TSMC, Intel, and Micron. With AI-driven demand surging as Big Tech invests billions in next-generation data centers, ASML’s order backlog remains strong and its pricing power intact.

On the risk side, the picture has become more complicated. The global semiconductor industry is deeply intertwined with international trade, and ASML’s supply chain is no exception. Rising tariffs, export controls, and regional restrictions on advanced chipmaking equipment have created friction in what was once a seamless global operation. Additionally, at current valuations, ASML no longer trades at a deep discount, leaving less margin for error if headwinds intensify.

For investors, the trade-off comes down to conviction in ASML’s long-term technological leadership versus caution in the face of short-term policy risks and stretched valuations. As a result, a staggered buying approach—splitting exposure before and after earnings—may offer the best balance of upside participation and risk mitigation.

Millions at Stake: ASML Faces Fiscal Hit from Trump’s Tariffs

One growing concern on investors’ minds is the potential financial impact of escalating U.S. tariffs, which could shave millions from ASML’s fiscal 2025 performance.

The renewed tariff regime announced by the Trump administration earlier this year targets a wide swath of advanced technology products, including semiconductor equipment. While ASML is a Dutch company, its machines incorporate components and materials sourced globally and are shipped to some of the very markets under heightened U.S. scrutiny.

ASML has already flagged higher logistical costs and potential delays in deliveries as it works to comply with new trade restrictions while continuing to serve key clients. Analysts estimate that incremental costs tied to tariffs and supply chain adjustments could run into the tens of millions this fiscal year.

While these headwinds are unlikely to threaten ASML’s long-term strategic position, they are a reminder that even best-in-class companies are not immune to political risk. Investors should factor this heightened uncertainty into their expectations, particularly when the stock is priced closer to fair value than at a discount.

Valuation: Fair, But With Caution

On a purely quantitative basis, ASML’s shares appear close to fairly valued.

Our proprietary discounted cash flow (DCF) model estimates the stock’s intrinsic value at around $687 per share, compared to the current market price of approximately $785. This modest premium, coupled with macroeconomic and geopolitical uncertainty, suggests the shares are not trading at a meaningful discount.

Trade tensions in particular present a risk. ASML’s complex, globally integrated supply chain is exposed to heightened tariffs and export controls, particularly amid U.S. efforts to curb advanced semiconductor shipments to certain regions.

On a forward price-to-earnings (P/E) basis, however, the stock trades at roughly 29x earnings, a level that looks reasonable given its strong market position and growth prospects.

A Balanced Approach to Timing

ASML remains one of the highest-quality businesses in the semiconductor space, and we have maintained a Buy rating on the stock throughout 2025. That said, the question of timing—whether to buy before or after earnings—requires a more nuanced approach.

Buying before earnings carries the risk of negative surprises, while waiting until after earnings could mean paying a higher price if results are strong.

One prudent strategy is to split your intended allocation, buying half before earnings and the other half after results are released. This approach balances the potential upside with downside protection, and is especially appropriate when a stock appears fairly valued rather than deeply discounted.

Gauging Market Sentiment Around ASML

Market sentiment toward ASML remains broadly positive, though it has cooled somewhat in recent months as investors grapple with mixed signals from the broader semiconductor sector.

On the bullish side, many on Wall Street continue to view ASML as a critical enabler of the AI revolution, with its dominance in EUV technology viewed as a near-insurmountable moat. Institutional investors have largely maintained or even increased their exposure to the name, citing the company’s long-term pricing power and the sustained capital expenditure plans of its largest customers.

However, there is also a sense of caution in the market. The stock’s strong rally earlier in the year left little room for error, and some investors are now taking a more wait-and-see approach ahead of earnings. The risk of short-term headwinds—such as new tariffs, rising costs, and possible order delays—has introduced an element of uncertainty that wasn’t as pronounced six months ago.

Options markets reflect this ambivalence. Implied volatility has ticked higher ahead of earnings, indicating investors are bracing for potential swings in either direction. Meanwhile, valuation multiples, while not excessive, suggest the stock is priced for continued flawless execution.

Overall, sentiment appears to reflect a delicate balance: confidence in ASML’s long-term leadership, tempered by near-term macro risks and elevated expectations. Investors with a long horizon may find this an opportunity to build a position, while traders focused on the next quarter may remain on the sidelines.

Bottom Line

ASML remains a critical enabler of the semiconductor and AI revolutions, boasting unrivaled technology, strong customer relationships, and excellent capital discipline. While the stock isn’t cheap relative to intrinsic value, it is attractively priced relative to peers and long-term prospects.

For long-term investors, ASML is still a buy—but with an eye toward risk management. Allocating part of your position before earnings, and the remainder after, offers a thoughtful way to gain exposure while mitigating near-term volatility.

In the current environment of geopolitical tension and rapid AI adoption, ASML stands as a compelling—if not bargain-priced—investment opportunity for patient investors.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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