A High-Quality Stock to Buy Before Its Big Discount Disappears

We think ASML’s recent pullback provides investors with a terrific buying opportunity. The company is the world’s largest supplier of lithography machines for semiconductors and earns a Wide Morningstar Economic Moat Rating based on intangible assets, cost advantages, and switching costs. Strong demand for advanced logic and memory semiconductors is driving impressive revenue growth today, and we expect that to continue, which is why we recently raised our fair value estimate for the stock. We assign the company’s ADRs a $2,050 fair value; they’re trading 17% below that. ASML was one of Morningstar Chief US Market Strategist Dave Sekera’s stock picks on a recent episode of The Morning Filter podcast, 4 Stocks to Buy Before They Bounce Back.

We believe ASML will remain the top lithography equipment provider to semiconductor foundries for the next two decades. TSMC, Intel, and Samsung redesigned their fabs a decade ago to make them suitable for ASML’s extreme ultraviolet lithography systems. This was a costly and long endeavor, so it is quite unlikely ASML will be displaced from its place in the foundry. In addition, no competitor has yet matched ASML’s technological leadership, and we don’t see this happening in the next 10 years. The company’s competitive advantage should keep expanding as it increases its already-high EUR 6 billion research and development budget.

Key Morningstar Metrics for ASML

• Fair Value Estimate
  : $2,050
• Star Rating
  : 4 Stars
• Economic Moat Rating
  : Wide
• Uncertainty Rating
  : High

Economic Moat Rating

We assign ASML a Wide Morningstar Economic Moat Rating supported by intangible assets, cost advantages, and switching costs. ASML is the world’s largest supplier of lithography machines for semiconductors with around 90% market share. It enjoys a wide technology gap versus competitors, and its large investments in research and development should continue widening its moat and act as a barrier to entry. Intangibles come from decades of internal know-how and long-term collaboration with firms like Carl Zeiss and scientific research institutes. Switching costs come from software and servicing of the machines; fabrication plants cannot afford unplanned downtime, which can cost millions of dollars.

Read more about ASML’s moat rating.

Fair Value Estimate for ASML Stock

Our fair value estimate is $2,050 per ADR share. We expect 2026 and 2027 sales of EUR 44 billion and EUR 56 billion, respectively. We estimate ASML could deliver close to EUR 70 billion in revenue and EUR 69 in EPS in 2028, even without fully utilizing its expanded capacity. We estimate 2030 sales could exceed EUR 80 billion with little new capacity additions. After a 28% sales compound annual growth rate for 2026-28, we model high-single-digit growth in 2029-30, as growth moderates after the ambitious expansion. For the next decade, we model a 15% revenue CAGR. We model EBIT margin expansion from 33% in 2025 to 45% in our terminal year.

Read more about ASML’s fair value estimate.

Risk and Uncertainty

ASML faces constant pressure to deliver, or clients will try to reduce their dependence on lithography. Trade tensions between the US and China are a headwind; because ASML machines contain US parts, the US has effective powers to limit ASML exports to China or any other country. ASML’s supply chain management is also critical: If a critical part supplier like Carl Zeiss had a manufacturing disruption, this would create a bottleneck for ASML. The cyclical nature of the semiconductor industry adds to ASML’s uncertainty. Customer concentration is high, with TSMC, Samsung, and Intel representing more than 50% of revenue.

Read more about ASML’s risk and uncertainty.

ASML Bulls Say

• ASML’s machines can last 30 years, providing recurring service revenue. The switching costs and intangible assets required to displace these machines are enormous, with no competitor coming close to ASML’s technological leadership.
• AI is driving strong semiconductor demand, which results in more fabs and more demand for tools across logic and memory markets.
• Output gains support price increases whenever new machine prototypes are introduced. Product platforms can share many parts and subsystems, facilitating standardization, shorter lead times, and procurement savings.

ASML Bears Say

• ASML sells a low-volume, high-price product. Lithography machines represent a high proportion of customer costs, so if the company fails to innovate, customers will look for alternatives.
• If controls on exports to China worsen, ASML’s near-term growth might suffer. The company has no effective control over this risk as it largely depends on US government decisions.
• The cyclical nature of the semiconductor industry adds to ASML’s risk profile. Also, ASML depends on a limited number of suppliers for certain components, so any disruption could create bottlenecks and delays.

This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of Sept. 21, 2026, close unless otherwise noted.