What Is ASML Stock Telling the Market?

If one thing is clear in this market, it’s that enthusiasm for advances in artificial intelligence, or AI, are driving some serious gains. Stodgy old Microsoft (MSFT) is once again one of the most innovative and valuable companies in the world. Investors in Super Micro Computer (SMCI) saw quadruple-digit gains in little more than a year’s time. And Nvidia (NVDA), the poster child for AI profits, just keeps climbing up the charts, setting new high after new high.

But earlier this week, all of those AI stocks with their lofty valuations and sky-high prices came tumbling down after guidance from another company, ASML Holding (ASML), came in lower than analysts expected. Chipmakers shed over $420 BILLION in a single day. That might have you asking yourself why ASML’s guidance is so important. And that’s got a lot to do with what exactly ASML does and where it stands in the AI marketplace.

ASML: A Real Monopoly

You see, ASML is critical when it comes to the development and expansion of artificial intelligence. And I think an old analogy is a good way to explain exactly what it does…

Artificial intelligence has become a modern-day gold rush. And it’s got all the trappings of one, including “gold miners.” These are companies like Microsoft, Amazon (AMZN), Google parent Alphabet (GOOG), and Tesla (TSLA). They’re trying to use this new technology to unlock a gold mine of profits. They’re not sure if that’s going to come from more revenues or fewer costs. But they’re steadily digging away at their claims hunting for that treasure.

And it’s also got companies supporting the miners. In the gold rushes of olden times, those companies sold things miners needed like picks and shovels. And today, they’re not a whole lot different. It’s just that the picks and shovels they’re selling are a lot more complicated. They’re the semiconductors that facilitate artificial intelligence programs. And companies like Nvidia are making those chips. So you could call them the pick-and-shovel plays of this gold rush.

But it doesn’t stop there. In the AI gold rush, just like in the actual gold rushes, there are companies that supply those suppliers. I mean, it’s not like picks and shovels just grow on trees. You’ve got to make them before you can sell them. So we’ve got companies like Taiwan Semiconductor (TSMC) that fabricate the silicon wafers companies like Nvidia turn into chips to sell to the AI gold miners.

Then you’ve got to ask yourself what those fabrication companies use to make the wafers. And the answer would be where ASML fits into the picture. Because ASML makes the machines that other companies use to make the wafers and chips.

And it’s got a near stranglehold on the industry with over 80% market share in this lithography market. That’s why ASML stock surged to as high as $1,110 earlier this year.

So when ASML talks about its future sales struggling, AI investors take notice. And that’s what happened when management reported earnings this month.

Is ASML Giving an AI Warning?

On October 15, ASML management cut its sales and earnings guidance for 2025. And ASML stock saw its worst single-day drop since 1998 as a result. You see, management cited chip market weakness that “is expected to continue in 2025.” That’s leading to customers getting more cautious about their orders. And that’s got ASML executives reducing their sales estimates for next year.

And what’s this all got to do with the rest of the market crashing and artificial intelligence? Well, ASML is the biggest supplier of semiconductor manufacturing equipment in the world. That includes the machines used to make the wafers used to make the chips used to “make” AI. So when investors heard customers are pulling back, they feared that meant the worst. The gold rush was canceled. It was all fool’s gold from the start.

But a wise man once told me that markets always make their first move in the wrong direction. And his sage advice proved true again in the case of ASML. As markets got some time to digest the message ASML management was sending, they realized that the weakness in demand wasn’t coming from AI. It was coming from all the other kinds of chips, like memory and logic chips.

Those customers are pulling back. So, despite what the company called a boom in AI-related chips, leading companies that make logic chips are delaying orders and ones that make memory chips are only planning to add “limited” new capacity.

That’s not great news for the semiconductor market as a whole. But it’s certainly not the warning signal investors were treating it as the day earnings were announced. It’s got zero to do with AI and everything to do with the other chip market segments. The AI rally is alive and well.

ONE Thing That Could Stop the AI Rally

As long as companies keep investing in AI research and development, and as long as investors stay excited about the possibilities AI offers, this rally is alive, well, and making a lot of people a lot of money. But there is one thing that could easily stop it right in its tracks.

It’s not government over-regulation. And it’s not a critical mineral shortage. It’s not about money or investor enthusiasm, either. And it’s got nothing to do with semiconductors or silicon. It’s all about energyand the MASSIVE amount of it required to run AI programs.

I really don’t think people are getting the magnitude of the demand. But it’s real. At first there was a rush to build new data centers to rent out to companies developing AI. But now that’s slowed to a crawl as those data center builders try to figure out how to power their servers now that they’ve realized the local electrical grid can’t handle that kind of draw.

The same thing happened across Canada when cannabis grows and crypto mining operations started appearing everywhere. Towns found out really quickly that if you have both, your citizens don’t have enough power to run their lights. And that’s starting to play out down here, minus the weed.

But the solution could have already arrived in the form of small, portable power stations that can generate enough zero-carbon electricity to power not only those AI data centers, but also the towns around them. Now, there are lots of companies working on these new generation stations. But there’s only one that’s able to produce the fuel they all need.

We’ve prepared a complete report on the opportunity this little-known company presents. And I want to share it with you today. Just make sure you act quickly. Investors are taking note and shares are up nearly 100% in the past month alone. But there’s still a long way to go.