The Monopoly Behind AI Chips

If you want to understand the real bottleneck in semiconductors, it isn’t wafers, fabs, or even chip designers like Nvidia. It’s the machines that etch impossibly small patterns onto silicon. And in that game, there’s just one winner, ASML.

ASML isn’t just another chip equipment supplier. It has something no one else on Earth can build, extreme ultraviolet lithography systems.

Without these tools, the AI chips powering today’s data centers simply couldn’t exist. That monopoly power makes ASML one of the most important and underrated growth stocks in the market today.

Key Points

• ASML is the sole maker of EUV lithography machines, giving it irreplaceable control over advanced chipmaking.

• New High-NA EUV tools, priced near half a billion each, extend its dominance.

• With 50%+ margins and strong recurring service revenue, ASML is riding the AI chip boom.

1 Monopoly Built on Physics

What makes ASML’s moat different from a typical “competitive advantage” is that it’s rooted in physics.

EUV technology requires producing light at a wavelength of 13.5 nanometers, something that only happens when a high-power CO₂ laser blasts tiny droplets of molten tin 50,000 times a second. That plasma creates EUV light, which then has to be reflected across a chain of ultra-precise mirrors before it hits the wafer.

After a dozen bounces, only ~1% of the original energy makes it to the wafer. That inefficiency is why these machines are so massive, power-hungry, and nearly impossible to copy. Even if a competitor spent tens of billions, it would still be decades behind.

ASML also locked down its optics partner, Carl Zeiss SMT, by buying nearly a quarter of the company. Zeiss is the only company capable of manufacturing the specialized mirrors EUV requires. That equity stake not only funds research but also secures supply for ASML, tightening its grip on the industry.

The Next Leap Forward

Just when EUV itself looked like the end of the road, ASML rolled out High-NA EUV, a technology that cranks the numerical aperture from 0.33 to 0.55. The higher the NA, the finer the detail you can print on chips.

These tools are enormous and cost close to half a billion each. Intel is the early adopter, betting its next-generation “14A” process will rely on High-NA. TSMC, the foundry giant, is holding off for now, preferring to stretch standard EUV as far as it can. But sooner or later, the physics catches up, and the industry will have no choice but to follow.

More Than Just Big Machines

In Q2 2025, ASML pulled in almost 8 billion in net sales, with over €2 billion coming from installed-base services like upgrades, spare parts, and field support. That recurring revenue smooths out the boom-bust cycles of chipmaker spending.

Margins are stellar and management reported a 53.7% gross margin and a net income margin of nearly 30% last quarter. Very few industrial companies in the world run numbers like that.

And ASML keeps upgrading its existing tools. The latest EUV platform can process ~220 wafers per hour, and many older machines are being retrofitted to hit that throughput.

Each incremental wafer per hour makes fabs more efficient, reinforcing ASML’s role as an economic gatekeeper for chipmaking.

Riding the AI Wave

The AI boom is the perfect storm for ASML. Cutting-edge GPUs require the most advanced process nodes, which means every AI server rack is indirectly an ASML sale.

Competition between foundries only helps. TSMC may lead today, but Samsung just won Tesla’s contract for its next-gen AI chips, and Intel desperately needs wins to keep its foundry ambitions alive. Every one of those battles drives more orders for ASML’s EUV systems.

Risks Worth Watching

If Intel’s next node stumbles or TSMC delays High-NA adoption, system sales could slip.

Export controls and tariffs remain unpredictable, and ASML itself has flagged 2026 as a year of uncertainty.

High-NA’s new half-field design could create yield challenges on very large chip dies, requiring customers to adapt.

Despite these risks, the company still expects 15% revenue growth in 2025. Even if 2026 is slower, the long-term trajectory is intact.

Valuation and Long-Term Outlook

At nearly 28× forward earnings, ASML isn’t cheap but it’s not outrageous for a business with margins north of 50%, no direct competition, and a customer base that can’t function without it.

ASML is less a cyclical chip stock and more a tollbooth on the future of computing. Whether it’s AI, autonomous driving, 6G, or advanced memory, every road runs through its machines.

Final Take

Most growth stories rely on faith. ASML doesn’t as the monopoly on EUV lithography is a hard fact, one secured by decades of physics, engineering, and supply-chain dominance.

If you believe semiconductors are the backbone of the next decade’s economy and it’s hard to argue otherwise ASML isn’t just a good stock to own, it’s THE game in town.