ASML Stock Isn't Cheap, but It Might Still Be a Bargain

ASML (NASDAQ: ASML) is up 79.5% over the last year, far outpacing the 26.8% gain in the tech sector and the 22.4% increase in the Nasdaq Composite (NASDAQINDEX: ^IXIC).

Analyst consensus estimates have ASML raking in $29.69 in 2026 earnings per share (EPS) and increasing 26.3% to $37.51 in 2027. Even with that exceptional growth rate, ASML is trading at a whopping 35.1 times 2027 projected earnings -- which is far from cheap.

Here's why ASML could still be a bargain for investors with ultra-long-term time horizons.

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All roads lead to ASML

Hyperscalers like Amazon, Microsoft, Alphabet, and Meta Platforms are buying chips for AI data centers -- benefiting companies like Nvidia and Broadcom. But those companies don't actually manufacture the chips.

That business goes to contract manufacturers like Taiwan Semiconductor, Samsung Electronics and Intel, which have massive semiconductor fabrication facilities. These plants are among the most tech-savvy sites in the world and feature advanced equipment for precision-engineering AI chips.

Semiconductor equipment makers are among the greatest beneficiaries of artificial intelligence (AI) spending. And ASML is the most valuable of the semiconductor equipment makers because it has a virtual monopoly on the most important part of the chipmaking process -- lithography.

ASML invested over 6 billion euros and spent over 17 years cracking the code on extreme ultraviolet (EUV) lithography, which bounces light off of specialized multi-layer mirrors inside a vacuum chamber rather than using lenses to refract light. This process allows ASML to use EUV light that would otherwise be absorbed, enabling more transistors per microchip, interconnected layering, and ultimately better performance. ASML's technology is hard to replicate because it's both advanced and designed for high-volume manufacturing, which is exactly what chip manufacturers need to accelerate production cycles.

Next-generation chips are pushing fabs to buy ASML's latest EUV machines -- creating a boom in demand. In the fourth quarter of 2025, EUV accounted for 56.1% of total net bookings. And only two of the EUV systems sold were ASML's most advanced high numerical aperture (NA) machines.

ASML is worth its premium price

ASML makes incredibly complex products, but its investment thesis is actually pretty simple. AI chip innovation drives greater demand for cutting-edge fabs equipped with ASML machines. And given we are still in the early stages of the high-NA EUV rollout, there's a clear runway for sustainable growth for ASML.

But ASML isn't an all-or-nothing AI stock. A big part of its business is still deep ultraviolet (DUV) machines needed to manufacture general-purpose chips. DUV systems are used in parallel with EUV to make AI chips. Servicing lithography machines in operation (predominantly DUV) is a massive part of ASML's business -- accounting for about a quarter of total revenue.

I wouldn't be surprised if ASML stock cooled off, giving earnings time to catch up to bring the valuation down. But given the fundamentals, ASML has a very good chance of outperforming the major indexes over the long term, and will probably become the first European company to reach $1 trillion in market cap.

Daniel Foelber has positions in ASML and Nvidia. The Motley Fool has positions in and recommends ASML, Alphabet, Amazon, Intel, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.