ASML Holding (NASDAQ:ASML) is rocketing higher on strong earnings.
Up about $38 a share, the Dutch semiconductor giant reported a substantial jump in fourth quarter net bookings, which tells us demand for its chipmaking tools is still strong. That’s even as DeepSeek’s lower cost model raises issues over artificial intelligence spending.
Key Points About This Article
- Up about $38 a share, Dutch semiconductor giant ASML reported a substantial jump in fourth-quarter net bookings, which tells us demand for its chipmaking tools is still strong.
- Net bookings, a key indicator of demand, were up to 7.09 billion euros, which is up about 170% from its third quarter. It was also well above estimates for 3.99 billion euros.
- Plus, analysts argue the reaction to DeepSeek was overblown.
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In its latest quarter, the company posted net sales of 9.26 billion euros ($9.64 billion), as compared to estimates for 9.07 billion euros. Net profit came in at 2.69 billion euros, as compared to estimates for 2.64 billion euros.
Net bookings, a key indicator of demand, were up to 7.09 billion euros, which is up about 170% from its third quarter. It was also well above estimates for 3.99 billion euros.
With regards to DeepSeek, ASML CEO Christophe Fouquet says he doesn’t see any signs of a slowdown in demand for AI-focused chips. Instead, he says “A lower cost of AI could mean more applications. More applications mean more demand over time. We see that as an opportunity for more chips demand,” as quoted by CNBC.
Making it even more attractive, ASML just declared a dividend of 1.52 euros, which is payable on February 19. The company also expects to declare a total dividend for the year of 6.40 euros which is about 5% higher year over year.
Analysts are Just as Bullish
Goldman Sachs just reiterated a buy rating with a price target of 1,010 euros. All after strong earnings and expectations of continued strength in advanced memory. The firm added that ASML expects its 2025 business to go back to a more normalized sales ratio.
Bank of America reiterated its buy rating with a price target of 803 euros. The firm is bullish on strong earnings and expectations of a sales drop of 16% quarter over quarter, which is still 9% above Wall Street expectations.
DeepSeek Reaction Was Also Overdone
If you’re looking for a reason to be bullish, consider this. Analysts at Citi pointed out that US companies still maintain a substantial advantage thanks to sophisticated chips.
Plus, according to Cantor Fitzgerald, the AI advancement with DeepSeek is “very bullish” for chip stocks, “citing the increasing demand for processing power as artificial general intelligence comes closer to reality,” as noted by Investing.com.
Bernstein analysts also say the Street’s reaction was overblown.
“I am not of the belief that we’re anywhere close to the cap on compute needs for artificial intelligence,” said the analysts, as quoted by Yahoo Finance. “I’m of the belief that if you’re freeing up compute capacity, it likely gets absorbed … We’re going to need innovations like this if you’re going to be able to keep things going.”
Other analysts say the latest innovation will help create more solutions with less overhead expenses, which will eventually lead to higher EPS numbers.
“If DeepSeek is everything they’re saying, this is ultimately positive for productivity around the world for all sectors … it certainly isn’t the end of the story of the US exceptionalism and productivity,” added Principal Asset Management, as also quoted by Yahoo Finance.
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