The only company on Earth that can make the machines that make advanced semiconductors — ASML's EUV lithography monopoly is the deepest technology moat in the world
Pat Dorsey
Dorsey Asset Management
“Pat Dorsey: 'ASML has the widest economic moat I have ever seen in my career. A 100% monopoly in a critical technology with no substitute is as good as it gets.'”
The Business
- ASML Holding NV is the world's sole manufacturer of extreme ultraviolet (EUV) lithography machines, essential for producing advanced semiconductors
- The company also manufactures deep ultraviolet (DUV) lithography systems used for less advanced chip manufacturing, maintaining ~90% market share in all lithography
- Revenue comes from new system sales (~65%) and installed base management (service, upgrades, spare parts ~35%), providing recurring revenue
- FY2025: EUR 32.7B revenue, EUR 9.6B net income, 35% operating margin, EUR 11.1B free cash flow, headquartered in Veldhoven, Netherlands
Why They Own It
“Pat Dorsey: 'ASML has the widest economic moat I have ever seen in my career. A 100% monopoly in a critical technology with no substitute is as good as it gets.'”
- ASML has a 100% monopoly on EUV lithography — the only technology capable of manufacturing chips below 7nm, which power AI, smartphones, and data centers
- Each EUV machine costs $200M+ and requires thousands of precision components from an exclusive supply chain that took 30 years to build
- FY2025: EUR 32.7B revenue (+16%), EUR 9.6B net income, EUR 11.1B free cash flow — a business with 35% operating margins and extraordinary cash generation
- Every major chipmaker (TSMC, Samsung, Intel) depends on ASML — there is no substitute technology and no alternative supplier
- The AI revolution requires exponentially more advanced chips, which requires more ASML EUV and High-NA EUV machines
What the investor sees
ASML trades at approximately $1,293/share with a ~$503B market cap, or roughly 52x earnings. Dorsey's thesis is that the premium valuation is justified because ASML's monopoly is permanent and growing — as AI drives demand for more advanced chips, ASML is the sole bottleneck in the semiconductor supply chain. High-NA EUV (next-gen machines at $350M+ each) extends ASML's monopoly for another decade. At 15%+ revenue growth and 35% margins, the earnings growth supports the premium multiple.
Financial Snapshot
EUR 32.7B
revenue FY2025
EUR 9.6B
net income
~$503B
market cap
EUR 24.71
eps
35%
operating margin
EUR 11.1B
free cash flow
16% YoY
revenue growth
100%
euv market share
The Moat
- Absolute monopoly in EUV lithography — 100% market share with zero competitors capable of producing EUV systems
- 30 years of R&D and tens of billions in cumulative investment create an insurmountable technology barrier
- Exclusive supplier ecosystem — key components (light sources from Trumpf, optics from Zeiss) are produced exclusively for ASML
- Installed base lock-in — chipmakers invest billions in ASML-based fabs, creating massive switching costs
- Network effects in knowledge — ASML's engineers, supply chain relationships, and institutional knowledge compound over decades
What Could Go Wrong
Geopolitical risk — US/Netherlands export controls restrict ASML sales to China, its second-largest market
Semiconductor cycle — chip industry downturns can delay orders and reduce revenue temporarily
High-NA EUV adoption risk — the $350M+ next-gen machines require chipmakers to justify massive capital outlays
Customer concentration — TSMC, Samsung, and Intel represent the vast majority of revenue
Valuation risk — at 52x earnings, any disappointment in growth expectations could cause significant multiple compression
Catalysts
- AI-driven chip demand — the explosion in AI workloads requires exponentially more advanced chips, driving EUV demand
- High-NA EUV ramp — next-generation machines at $350M+ each represent a major revenue growth opportunity
- Installed base management growth — service and upgrade revenue from the growing installed base provides high-margin recurring income
- New fab construction globally — TSMC, Intel, Samsung building new fabs in US, Europe, and Asia, each requiring multiple ASML systems
- Advanced packaging demand — new chip architectures require additional lithography steps, increasing ASML content per chip
In Their Own Words
“Pat Dorsey: 'The moat at ASML is not just one thing — it's the combination of 30 years of R&D, exclusive supplier relationships, and the sheer impossibility of replicating the technology. No competitor can catch up.'”
“Pat Dorsey: 'I wrote the book on economic moats. ASML is the single best example of a wide moat company in the world — a monopoly supplier of a product that every technology company on Earth depends on.'”
“Pat Dorsey: 'When people ask me what a wide moat looks like, I point to ASML. One hundred percent market share in a technology that took 30 years and tens of billions to develop. That's a moat.'”