ASML's EUV Machines Are Becoming More Valuable Than Ever. Here's Why.

ASML (NASDAQ: ASML) is the world's largest producer of lithography systems, which optically etch circuit patterns onto silicon wafers. It's also the only producer of extreme ultraviolet (EUV) lithography systems, which are required for manufacturing the world's most advanced chips.

All of the world's top foundries -- including TSMC (NYSE: TSM), Samsung, and Intel (NASDAQ: INTC) -- use ASML's EUV systems to produce their top-tier chips. That makes the Dutch company a linchpin of the global semiconductor market.

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ASML developed its EUV technology over the past three decades, giving it a wide moat, no meaningful competitors, and absolute pricing power. Its low-NA (0.33 numerical aperture) EUV systems, which are currently used to produce the world's smallest chips, cost approximately $200 million and require multiple planes to ship. Its newest high-NA (0.55 numerical aperture) systems, which can produce even smaller chips, cost more than $400 million.

TSMC plans to push ASML's low-NA systems to their limits before transitioning to high-NA systems in 2029. Intel has already begun using high-NA systems to produce its newest 18A chips, while Samsung plans to adopt them in 2027. TSMC's conservative strategy might help it cut costs, but ASML will reportedly raise its prices for low-NA EUV systems in the near future.

Why are ASML's systems getting more expensive?

By monopolizing the EUV market, ASML can easily raise its prices without losing customers. It also needs to keep its prices high to cover its high engineering and maintenance costs, as well as the premiums it pays to secure a steady supply of specialized optics and lasers.

ASML also notes that the rapid growth of the artificial intelligence (AI) market makes its EUV systems even more valuable to top fabs like TSMC. Since those productivity gains boost the fabs' profits, ASML can justify its price hikes on both older and newer lithography systems.

The global EUV market could grow at an 11.4% CAGR from 2026 to 2032, according to Research and Markets. ASML expects to generate revenue of €44 billion to €60 billion ($51 billion to $69 billion) by 2030. That would represent a 5-year CAGR of 6%-13% from 2025.

Should you buy ASML's stock today?

ASML isn't growing as rapidly as top AI chipmakers like Nvidia, but it's a more balanced way to profit from the semiconductor market's long-term growth. ASML controls a crucial link in the semiconductor supply chain, and it can repeatedly raise its EUV prices even if fabs need to absorb those costs or pass them on to their fabless customers.

Leo Sun has positions in ASML. The Motley Fool has positions in and recommends ASML, Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.