The stock market has witnessed remarkable gains over the last couple of years, with numerous companies at the forefront of groundbreaking innovations in artificial intelligence (AI). Among them, Nvidia dramatically stands out as a benchmark for AI-driven success. Its graphics processing units (GPUs) have become indispensable for training and operating complex language models, resulting in an astounding 865% increase in its stock price over the past two years. This surge led to a significant 10-for-1 stock split in June.
Nvidia isn’t the only AI-centric company to have embraced stock splits recently. Firms like Broadcom, Super Micro Computer, and Lam Research have also executed similar strategies, raising investor interest. While a stock split might not generate a direct increase in a company’s intrinsic value, it often signals management’s confidence in future growth, making it a point of interest for savvy investors.
So, what company could be next in line for a stock split? ASML Holding (NASDAQ: ASML), a key player in the semiconductor supply chain, emerges as a compelling candidate. With its shares trading at approximately $835 each, ASML represents an enticing opportunity for investors to buy before any potential splitting.
ASML specializes in manufacturing advanced photolithography machines crucial for semiconductor production. These machines are integral to companies like Nvidia, as they enable the creation of high-performance chips essential for AI technology. ASML uniquely provides extreme ultraviolet (EUV) lithography systems, essential for producing cutting-edge chips, particularly for AI data centers.
The company has a steady revenue stream not only from selling machines but also from servicing existing equipment and supplying replacement parts. This diversification allows ASML to maintain growth even when machine sales plateau, as ongoing service revenues from installed machines have increased significantly over the years.
In the coming year, ASML anticipates a transformative period. While it’s projected that 2024 will be a year of transition—without revenue growth and slight declines in gross margins—the forecast for 2025 is optimistic. Management expects to achieve revenues ranging from €30 billion to €40 billion ($33.17 billion to $44.2 billion), signifying a potential 27% jump from 2023.
In its long-term outlook, ASML has set ambitious revenue goals, projecting sales between $48.65 billion and $66.34 billion by 2030. This projection does not take into account the AI boom experienced recently, suggesting that the actual figures may exceed expectations. ASML envisions healthy gross margins between 54% and 60%, supporting the belief that profit growth will be significant as the company capitalizes on its technological advantages and strong ties with major foundries globally.
Given that ASML’s stock is now within reach for many investors, speculation around a stock split may be a wise consideration. While the company last executed splits in the late 1990s, the favorable outlook on AI spending could propel ASML into a new phase of growth, justifying a stock split sooner rather than later.
Even without the consideration of a stock split, ASML remains an attractive investment opportunity. Trading at approximately 26 times forward earnings, it offers a promising growth trajectory that should appeal to potential investors. When compared to other AI stocks, ASML offers substantial value, especially considering its role as a linchpin in AI chip manufacturing.
For those contemplating investing $1,000 in ASML, it’s essential to weigh this decision carefully. Notably, the Motley Fool Stock Advisor team has identified ten high-potential stocks for investors, with ASML not making the list. However, the insight gained from such recommendations can illuminate broader market trends that may benefit long-term strategies.
This emerging landscape of AI-driven stocks offers diversified opportunities for investors. As innovation continues to reshape various sectors, identifying companies with robust technological foundations and solid market positions like ASML may lead to fruitful investments for years to come. The future for ASML seems bright, and its stock position is one worth watching closely as developments unfold.