1 Brilliant Artificial Intelligence (AI) Stock Down 30% From Its All-Time High That's a No-Brainer Buy

Key Points

• Manufacturing cutting-edge chips requires ASML's machines.

• The stock's valuation is well below its historical levels.

• ASML's results regularly exceed management's conservative guidance.

• 10 stocks we like better than ASML ›

Few companies' products are as critical to the modern world's technological infrastructure as those made by ASML (NASDAQ: ASML). Without the chipmaking equipment the Netherlands-based manufacturer provides, much of the world's most innovative technology wouldn't be possible. That makes it one of the most important companies in the world, even if many people have never heard of it.

Over the long term, ASML has been a profitable investment, but the stock has struggled recently -- it's down by more than 30% from the all-time high it touched in July 2024. I believe this pullback presents an excellent opportunity to buy shares of this key supporting player for the AI sector and other advanced technologies.

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Image source: Getty Images.

ASML has been a victim of government policies around the globe

ASML makes lithography machines, which trace out the incredibly fine patterns of the circuits on silicon chips. Its top-of-the-line extreme ultraviolet (EUV) lithography machines are the only ones capable of printing the newest, most powerful, and most feature-dense chips. No other companies have been able to make EUV machines thus far. They are also highly regulated, as Western nations don't want this technology going to China, so the Dutch and U.S. governments have put strict restrictions on the types of machines ASML can export to China or its allies. In fact, even tighter new regulations were put in place last year that prevented ASML from servicing some machines that it previously was allowed to sell to Chinese companies.

As a result of these export bans, ASML's sales to one of the world's largest economies have been curtailed. This led to investors bidding the stock down in 2024 -- a drop it still hasn't recovered from.

2025 has been a relatively strong year for ASML's business, but tariffs have made it challenging to forecast where matters are headed. Management has been cautious with its guidance for the year as it is unsure of how tariffs will affect the business. In its Q2 report, management stated that tariffs had had a less significant impact in the quarter than initially projected. As a result, ASML generated 7.7 billion euros in sales, which was at the high end of its 7.2 billion to 7.7 billion euro guidance range. For Q3, the company says it expects sales of between 7.4 billion and 7.9 billion euros, but if tariffs have a significantly negative impact on the economic picture, it could come up short.

Given all the planned spending on new chip production capacity to meet AI-related demand, investors would be wise to assume that ASML will benefit. However, the company is staying conservative in its guidance even as it prepares for growth. This conservative stance has caused the market to remain fairly bearish on ASML's outlook even as all signs point toward a strong 2026.

This makes ASML a buying opportunity at its current stock price.

ASML's valuation hasn't been this low since 2023

Compared to the last five years, ASML trades at a historically low price-to-earnings (P/E) ratio and a forward P/E ratio.

ASML PE Ratio data by YCharts.

With expectations for ASML at low levels, investors shouldn't be surprised if its valuation rises sometime over the next year, particularly if management's commentary becomes more bullish as demand increases in line with chipmakers' efforts to expand their production capacity.

This could lift ASML back into its more normal valuation range in the mid-30s, which is perfectly acceptable given its growth level, considering that it has no direct competition.

ASML is a great stock to buy now and hold for several years or longer, allowing you to reap the benefits of chipmakers increasing their production capacity. Just because the market isn't that bullish on ASML now, that doesn't mean it won't be in the future. This rare moment offers an ideal opportunity to load up on shares of a stock that I believe is one of the best values in the market right now.

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Keithen Drury has positions in ASML. The Motley Fool has positions in and recommends ASML. The Motley Fool has a disclosure policy.