Top chip manufacturer "arms race", is this chip "arms dealer" the winner?
The world's top chip manufacturers are getting involved in an AI arms race, with ASML emerging as the biggest beneficiary. ASML is the only company capable of producing extreme ultraviolet lithography machines, which are crucial equipment for manufacturing cutting-edge AI chips. ASML has invested heavily in research and development, establishing a strong competitive barrier. It is expected that its service revenue will continue to grow, with a projected 30% revenue increase in 2023. However, compared to other chip companies benefiting from the AI boom, ASML's stock price has shown a relatively lower increase
Global leading chip manufacturers are currently embroiled in an "AI arms race", with lithography equipment supplier ASML emerging as the big winner behind the scenes.
Last week, fund manager Vijay Shilpiekandula, working for the renowned family office Duquesne Family Office LLC, stated in a speech that ASML is in the best position to profit from the AI boom by providing key equipment for chip production to giants like TSMC, Intel, and Samsung.
He explained that while these chip manufacturers are competing fiercely to seize the opportunity in the rapid development of AI, ASML firmly controls the upstream production of lithography machines.
ASML is currently the only company in the world capable of producing extreme ultraviolet (EUV) lithography machines, which are essential equipment for producing chips for cutting-edge artificial intelligence technologies.
Vijay stated:
Whether it's NVIDIA GPUs, ChatGPT, or smartphones, none of them would be possible without ASML.
He also emphasized that ASML has invested heavily in research and development over the years, with thousands of PhDs and tens of thousands of patents, creating strong barriers in the field of lithography machine manufacturing. He expects that the service revenue, which currently accounts for about 20% of ASML's sales, is also likely to continue growing as more companies purchase its lithography systems.
In 2023, ASML achieved revenue of 27.6 billion euros, a year-on-year increase of 30%. However, compared to other chip companies benefiting from the AI boom, ASML's stock performance has been mediocre, with a year-to-date increase of about 38%, lower than NVIDIA (77%) and TSMC (43%).
