Why ASML Stock Dropped Today

ASML Holding (NASDAQ: ASML) holding stock dropped 4.6% through 3 p.m. ET Tuesday -- not through any fault of its own, though.

It dropped because of Samsung.

Image source: ASML.

Wall Street loves ASML

The contrary is more accurate. This morning, ASML stock actually won a price target hike when Morgan Stanley analyst Lee Simpson raised his estimated value of the stock 10% to 1,830 Euros ($2,091) -- just a day after fellow Street analyst David Dai from Bernstein SocGen raised his estimate to $2,623.

Dai cited "unprecedented AI-driven expansion in [demand for] both advanced logic and DRAM capacity," and the machines to manufacture such semiconductor chips (which ASML makes) for his hike. He thinks ASML will sell 91 such machines in 2027 and 113 in 2028 -- all at higher prices than this year. As sales continue to roll in, he sees ASML growing revenue by 30% annually through 2030, reaching 42.7 billion Euros ($48.8 billion) that year.

None of which mattered to investors today.

Samsung sell-off sinks ASML

Instead, investors are focused on South Korea's Samsung, which reported last night that its Q2 sales doubled year over year, and its profits surged many times over, to $58.4 billion. This should have sent the stock flying, but instead, Samsung's numbers underwhelmed investors (who expected a bigger earnings beat), who were also spooked by Samsung's promises to build more factories to meet demand.

But here's the thing: More factories churning out more DRAM might be bad for profits at Samsung and its rivals, if they overproduce. But it should be great news for ASML, which will sell the machines to outfit those factories. This, in a nutshell, is why I think the sell-off in ASML stock is a mistake. So long as the artificial intelligence market keeps booming, ASML stock should too.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML. The Motley Fool has a disclosure policy.