ASML Holding (ASML) : the absolute chip monopoly

2026-06-22 · By Lubin Danilo, founder of Lubin Investment

ASML is the only company in the world that manufactures EUV machines used to print the most advanced chips. Our screener gives it a perfect score across all our fundamental criteria. The single caveat: a very high valuation. An exceptional business, at an exceptional price.

• ASML is the sole global manufacturer of EUV (Extreme Ultraviolet Lithography) machines, the indispensable technology for making 7 nm, 5 nm, 3 nm, and 2 nm chips.
• Every major chipmaker — TSMC, Samsung, Intel — buys its equipment from ASML. No serious competitor exists.
• Our model gives ASML a perfect score across all our fundamental criteria: margins, growth, balance sheet strength, return on capital.
• The single friction point: a very high valuation, with a P/FCF (price divided by free cash flow per share) of 51x, well above the sector average.
• Geopolitical risk is real: ASML cannot export EUV machines to China since 2023, and restrictions on DUV machines have intensified since 2024.

ASML's absolute monopoly

To understand ASML, you first need to understand what EUV lithography is. When you buy a smartphone or a computer, the processor inside is engraved onto a silicon wafer with transistors just a few nanometers in size — tens of thousands of times thinner than a human hair. To engrave those transistors, you need an extraordinarily precise light source. EUV (Extreme Ultraviolet Lithography) uses light at a wavelength of 13.5 nanometers to print those transistors onto silicon. Without this technology, no advanced chip can be manufactured.

ASML is the only company in the world that has mastered this technology. And it is not for lack of competitors trying: Nikon, Canon, and government-backed consortiums have spent billions trying to replicate what ASML spent 30 years building. Nobody has succeeded. An EUV machine weighs 180 tonnes, has more than 100,000 components, requires 40 freight containers to ship, and costs between 150 and 200 million euros per unit. The technological gap is such that no actor can hope to close it in less than 10 to 15 years, even with massive investment.

The result: ASML holds 100% of the global market for EUV machines, and around 80% of the DUV (Deep Ultraviolet, the previous generation) market. TSMC, the Taiwanese foundry that manufactures chips for Apple, Nvidia, and AMD, accounts for approximately 60% of ASML's revenue. Samsung represents around 20%, and Intel around 10%. These are the three titans of semiconductor manufacturing, and they all depend on ASML for their most critical machines.

Why all our criteria are in the green

At Lubin Investment, I evaluate each company on 10 fundamental criteria. Each criterion is worth one point. The goal: an objective, reproducible score, comparable across sectors. ASML achieves a perfect score. Over the past five years, its revenue has grown steadily to approximately €28 billion in 2024. The order backlog exceeds €36 billion — more than a full year of revenue in advance. The gross margin runs around 50%, and the free cash flow margin is robust. ASML's Cash ROCE is well above our thresholds. Its balance sheet is healthy, with manageable debt. To review all the detailed metrics, see ASML in our screener: /screener.

The single friction point: valuation

I will be straight with you: ASML is one of the finest companies I have ever analyzed. But a great company and a great stock are two different things. ASML's P/FCF stands at 51.57 times. A valuation of 51x means you are paying today for 51 years of current free cash flow to own the stock. The semiconductor equipment sector average runs around 25 to 30 times. The market therefore prices ASML with a very significant premium, one that is only justified if future growth remains strong and durable.

There is also the China risk. Since 2023, ASML cannot export its EUV machines to China, following restrictions imposed by the US government. Since 2024, restrictions have been extended to the most advanced DUV machines. China had represented up to 15-20% of ASML's revenue before these measures. This share has already fallen, and could continue to shrink. And when TSMC represents 60% of your revenue, a geopolitical shock around Taiwan can have an immediate impact on your order book. To go deeper into our risk assessment methodology, check /methodologie.

My verdict on ASML

ASML is an exceptional company. Its competitive advantage is arguably one of the most solid in the global economy: a genuine, patented technological monopoly, impossibly difficult to replicate, on a product on which all key players depend absolutely. Growth is there. Margins are there. The order book is there. Our model awards the maximum score — and it is earned. But the valuation is equally exceptional, in the other direction. At 51 times free cash flow, the market has already priced in a great deal of good news. My approach: I watch very closely, define my entry price with rigorous discipline, and wait. To track ASML's valuation in real time, check our screener: /screener.

FAQ

What is EUV lithography and why does ASML hold the monopoly?

EUV lithography uses light at a wavelength of 13.5 nm to engrave transistors just a few nanometers in size onto silicon chips. ASML holds the global monopoly because this technology required 30 years of R&D and massive investment. No competitor has succeeded in replicating it despite spending billions.

Why can ASML no longer sell its machines to China?

Since 2023, the US imposed restrictions on exporting EUV machines to China. These restrictions were reinforced in 2024 to include advanced DUV machines. The objective is to prevent China from developing cutting-edge chips with potential military applications. China represented 15-20% of ASML's revenue before these measures.

Is the AI explosion good news for ASML?

Yes, directly. The more AI models are trained, the more advanced chips are needed. And to manufacture those chips, TSMC and Samsung must order more EUV machines from ASML. AI demand is therefore a very strong structural driver for ASML's order backlog.

Why is ASML so expensively valued despite its qualities?

Because the market pays a premium for a monopoly this solid. A valuation of 51x means investors expect strong, durable growth for many years. The risk: if growth disappoints or the cycle turns, the correction can be brutal.

Does ASML pay dividends?

Yes, ASML pays an annual dividend and also buys back its own shares. Both signal genuine financial strength. However, with such a high valuation, the dividend yield remains modest relative to the price paid. The core of the thesis rests on future growth, not immediate income.

Voir l'analyse ASML sur Lubin Investment

About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I have analyzed stocks through their fundamentals for several years and invest my own money with this method. I codified it into a tool that judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).