Why ASML Stock Rose 13% in May

Shares of ASML (NASDAQ: ASML) were on the move last month as the maker of extreme ultraviolet lithography (EUV) equipment rode a bullish wave in the semiconductor industry, as most sector stocks posted double-digit gains.

There wasn't much news out on the Dutch semicap company, but it signed a new customer, and the tailwinds in the sector helped propel it up 13%, according to data from S&P Global Market Intelligence.

As the chart below shows, the stock was volatile last week, but managed to finish with solid gains by the end of the month.

Image source: Getty Images.

What happened with ASML last month

The biggest news out on ASML was that Tata Electronics, the Indian manufacturing giant signed a memorandum of understanding to advance the semiconductor manufacturing ecosystem in India.

As part of the deal, ASML will enable the ramp of a new semiconductor fab in India, the first of its kind, and the partnership gives ASML a valuable foothold in a key market.

Meanwhile, ASML benefited from the shortages in the semiconductor industry, and anecdotal reports that companies are looking to Intel and Samsung for manufacturing capacity as TSMC appears to be sold out. That chain reaction could drive more demand for ASML's machines.

Finally, the company benefited from some positive analyst commentary. UBS, for example, raised its price target from 1,600 euros to 1,900 euros and recognized its unique position.

Can ASML keep climbing?

As a semiconductor capital equipment (semficap) stock, ASML operates in a different cycle from chipmakers, which are booming right now.

ASML's growth is more modest than its chip stock peers, and the company depends on China for a substantial portion of its revenue.

The stock has risen in recent months largely because of bets that the AI boom will lead to increased revenue for ASML. The company set a target of 44 billion euros to 60 billion euros in revenue by 2030. ASML hasn't updated that guidance, which it originally gave in 2024, but investors seem to think it will go higher. For 2026, the company expects revenue of 36 billion euros to $40 billion, meaning that ASML will almost certainly hike the bottom end of its forecast, assuming the AI boom continues.

Regardless of its financial results, ASML retains a monopoly on EUV machines, and that should continue to make the stock a winner. While the company will eventually need its revenue growth to accelerate to justify the current valuation, ASML looks like a must-own stock for the AI boom.

Jeremy Bowman has positions in ASML and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends ASML, Intel, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.