Fundamental Research
ASML, Nvidia, Intel and Lam Research
- In this report, we look at four semiconductor companies; ASML Holdings, Nvidia, Intel and Lam Research. ASML is our preferred option amongst the semiconductor stocks amid an industry benefitting from booming AI & data centre demand. ASML Holding
- The company occupies a monopoly in lithography equipment and is essential in the production of chips at scale.
- With AI and data centre demand growing along with large capex expenditure predicted from chip fabricators the requirement for ASML’s equipment will produce a tailwind for the company.
- Any future technological advancement of chips sub 2nm will require ASML’s High NA EUV machines of which there are no competitors.
- The global leader in chip design with a technological edge for chips required in the construction of data centres.
- Exceptional revenue and earnings growth that will continue for the next few years as big tech ramps up capital expenditure. Market leader in its field, however the share is just too expensive at the moment.
- High margin business, but any competition in the future will cause these margins to contract.
- Whilst quantitatively the share looks fairly valued, fundamentally the company raises causes for concern.
- A weak balance sheet, a foundry business that is bleeding cash and a lack of focus in the business results in a company that lacks direction.
- The best-case scenario for Intel would be external investment and divestiture of some of its business units.
- Currently they are 3rd best in multiple segments instead of focusing and being best in one segment.
- Operates in a niche segment in the semiconductor process with few competitors.
- Has benefitted from the AI boom and increased demand for chips.
- Has strong relationships with all three big fabricators (TSM, Intel, Samsung).
- Operationally efficient and focused management team. It should continue to grow in line with the AI boom but is valued at a premium.
Speaker
Pierre MullerThink Big Series