Key Points
Bernstein analyst Stacy A. Rasgon published a bullish note on the artificial intelligence industry today.
Still-strong demand for AI chips boosts Nvidia and Broadcom prospects -- and perhaps ASML's as well.
ASML Holding (NASDAQ: ASML) stock, the Dutch manufacturer of machines that manufacture semiconductors, jumped 5.1% through 11:40 a.m. ET Monday after Bernstein analyst Stacy Rasgon published a bullish note on the artificial intelligence industry.
Rasgon didn't mention ASML directly... but investors are acting almost like he did.
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Image source: ASML.
Bernstein loves Broadcom and Nvidia
In today's note, the Bernstein analyst argues that despite the sell-off in artificial intelligence stocks this year, "AI demand currently shows no signs of slowing." If things keep going the way they're trending, semiconductor titans such as Broadcom (NASDAQ: AVGO) could quadruple its 2025 profits to more than $20 per share, while Nvidia (NASDAQ: NVDA) could do nearly as well, growing from under $5 last year to $12 or more in 2027.
What does this have to do with ASML stock, though?
Consider: If Nvidia and Broadcom are swimming in profits, it makes sense the third-party contractors (such as TSMC) that make their chips would also have more money to spend. One step up the supply chain, it makes further sense that much of this money might be spent at ASML, buying machines to make even more of the chips that are producing the profit.
This is how good news for Broadcom and Nvidia could translate into great news for ASML. And the fact that Bernstein sees continued supply constraints from insufficient AI chip production lends further weight to the theory there will be great demand for ASML's machines.
What it means for ASML investors
Admittedly, at 46.5 times trailing earnings, ASML does not look cheap. But analysts already think the stock could grow its earnings 19% annually over the next five years. If Bernstein is right about the unceasing demand for AI chips, ASML stock could grow fast enough to become a buy.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.