ASML Has Incredible News for Nvidia Stock and Micron Stock Investors
Key Points
ASML sees chip and memory demand exceeding supply at least until 2028.
The Dutch company notes that the memory shortage could widen, strengthening the bull case for Micron Technology.
ASML management has said that it won't be able to meet demand for its machines despite significantly increasing capacity.
- Motley Fool Issues Rare "Total Conviction" Buy Alert ›
ASML Holding (NASDAQ:ASML) is one of the most important companies in the semiconductor ecosystem. The company enjoys a monopoly in the market for extreme ultraviolet (EUV) lithography machines, which are used for printing advanced chips deployed in artificial intelligence (AI) data centers.
So, when ASML released its results for the third quarter of 2026 on Oct. 14, it became clear that the AI infrastructure boom is far from over. The Dutch semiconductor giant reported impressive growth in revenue and earnings and noted that it is struggling to meet strong customer demand.
Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »
We will take a closer look at ASML's results in this article and explain why they bode well for two other semiconductor stocks -- Nvidia (NASDAQ:NVDA) and Micron Technology (NASDAQ:MU).
Image source: Getty Images.
ASML sees AI hardware demand outpacing supply for the next two years, at least
ASML sold 113 new lithography systems in the previous quarter, a massive increase over the year-ago period's sales of 66 units. Management's comments on the latest earnings call indicate that demand for its advanced chipmaking equipment will strengthen.
CEO Christophe Fouquet remarked:
Our leading edge high volume customers are sharing very good visibility, as a result of the increasing number of long term commitments they are securing with their customers. This extended visibility has led them to conclude that demand for their product will outpace supply through at least 2028.
ASML's machines are deployed by foundries, memory makers, and integrated device manufacturers. Its client list includes companies such as TSMC, Intel, Samsung, and Micron. So, ASML management's remarks that AI hardware demand will exceed supply at least through 2028 indicate that the favorable pricing environment fueling Nvidia and Micron's growth isn't going anywhere.
What's more, ASML's customers are interested in placing orders for 2029 and 2030 to meet the increasing demand for AI hardware. As a result, the company is now looking to expand its production capacity beyond the previously stated 2028 target of 30%. So, ASML's outlook should put to rest any concerns about a slowdown in the AI infrastructure space.
That's why now is a good time to buy chip stocks, following a recent dip in the sector, triggered mainly by concerns about rising financing costs due to higher interest rates.
Why investors should buy Nvidia and Micron following ASML's commentary
Shares of Micron and Nvidia have pulled back over the past couple of weeks. While Micron stock is down 13% since Oct. 6, Nvidia has shed 9% of its value (as of this writing). The declines mean that investors can buy these AI stocks at extremely attractive valuations.
NVDA PE Ratio data by YCharts
Buying Nvidia and Micron at these levels is a no-brainer. Nvidia CEO Jensen Huang has already pointed out that the company's chip sales will double next year. Also, Nvidia management noted on the previous earnings call that it anticipates a 70% increase in revenue in fiscal 2028 in a supply-constrained environment.
Nvidia's earnings per share are expected to increase by 95% in the current fiscal year (ending in January 2027), followed by a 71% jump in the next one.
NVDA EPS Estimates for Current Fiscal Year data by YCharts
On the other hand, ASML management pointed out on the earnings call that "supply shortages across advanced logic and memory nodes continue to increase in size and in time horizon." This is great news for Micron investors. The company ended fiscal 2026 on a strong note, with revenue increasing 256% year over year to $133.19 billion and non-GAAP earnings per share increasing 9x year over year to $75.52.
Micron's earnings per share are expected to jump by more than 2x this fiscal year, followed by another double-digit increase in fiscal 2028.
MU EPS Estimates for Current Fiscal Year data by YCharts
We have already seen that both Micron and Nvidia trade at attractive forward earnings multiples, which are lower than the tech-laden Nasdaq Composite index's earnings multiple of 42. Given that both companies are on track to deliver impressive earnings growth over the next couple of fiscal years, they should ideally be rewarded with a premium valuation.
That's why I think now is the right time to buy these chip stocks amid the semiconductor sector's correction, as the strong growth prospects of Nvidia, Micron, and even ASML could send their shares flying higher in the long run.
Missed AI’s "Act 1"? Act 2 Could Be 14x Bigger
Most investors think they missed the AI boat because they didn't buy Nvidia in 2005.
But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout, a massive technology build-out that Google’s CEO says could be more profound than fire or electricity.
While everyone watches the chip designers, one "backbone" company provides the critical technology that Nvidia and AMD literally cannot function without. We’ve detailed this under-the-radar player in our new AI Playbook.
Continue »
Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Intel, Micron Technology, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
Recommended Articles
