This Artificial Intelligence (AI) Stock Is Already Seeing Demand Stretching Into 2030

There have been looming question marks about artificial intelligence (AI) stocks of late, and whether a bubble may be bursting. AI stocks have been struggling recently as the market worries about how much longer the strong results may last.

One top tech company, however, says that it's already seeing interest for orders years in advance, due to the need for AI chips. That company is ASML Holding (NASDAQ:ASML), whose lithography machines are essential in the manufacturing process for advanced chips. ASML posted its latest earnings numbers, which not only showed that it's been growing well of late, but also that demand remains robust for a long time, and that customers are placing orders years in advance.

The big question, however, is whether the tech stock is still a good buy given its high valuation. I'll look to answer that below.

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ASML's results have been solid, but is its future growth already priced in?

The challenge for investors when buying a stock is that it isn't as simple as buying it because the business has done well recently. If a stock is trading at a high valuation, then the market may already be pricing in a fair bit of growth. Thus, unless there is a new development that suggests there's much more growth ahead than what was already expected, the stock itself may not necessarily rally higher or be seen as a good buy.

ASML is one of the largest tech companies in the world, with a market cap of more than $630 billion, and whose growth rate exceeded 55% last quarter. It's currently trading at a price-to-earnings (P/E) multiple of 40, which is significant, and at that kind of valuation, a premium has been priced in. Its forward P/E multiple, which is based on future earnings results that analysts expect from the business in the year ahead, is at 29, which also isn't low; the S&P 500 average is a little over 19 right now.

The company did, however, give investors reason to remain bullish on more growth ahead, as CEO Christophe Fouquet says that AI investments are driving significant orders, and that, "In light of their demand visibility, some customers are expressing an interest in placing orders with us for 2029 and even 2030."

Why ASML stock is still worth buying

ASML's stock may not be cheap, but the company has a dominant position in the market and a strong competitive advantage. Its lithography machines are essential in the tech sector, and that's evident with customers seeking out orders well in advance, in anticipation of demand even years ahead.

Some growth is certainly priced in for ASML's stock, but with the company already seeing demand into 2030, it may well be worth trading at an even higher valuation for that kind of stability and growth.

David Jagielski, CPA 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.