Two AI Shares with Potential for Million-Dollar Gains
### AI-Focused Stocks: ASML and Alphabet Shape the Future of Technology
The semiconductor industry and AI sector are intertwined, with key players like ASML and Alphabet driving growth and innovation in both areas.
#### ASML: Leading the Charge in Semiconductor Manufacturing Equipment
ASML, a Dutch company specialising in extreme ultraviolet (EUV) lithography systems, is at the forefront of the semiconductor manufacturing industry. Its equipment is essential for producing advanced 3nm and 5nm chips that power AI applications in data centers, autonomous vehicles, and generative AI models.
Current growth prospects for ASML are promising, with the company poised to capitalise on the AI chip demand boom. After a challenging 2024 marked by a 14% decline in EUV sales, analysts forecast a strong rebound in 2025, with EUV revenues expected to grow 41% year-over-year to €11.1 billion. High Numerical Aperture (High-NA) EUV systems sales are projected to triple from €465 million in 2024 to €1.7 billion in 2025, contributing to a total EUV sales increase of 49%.
ASML's Q1 2025 revenue grew 16.6% year-over-year to €7.7 billion, with EUV systems making up 56% of net system sales. Despite some margin pressure due to tariffs, the company maintains ambitious full-year revenue guidance between €30 and €35 billion.
However, some analysts have tempered growth expectations due to concerns over declining returns on EUV capital expenditures and slower growth intensity. Yet, ASML remains a dominant, strategic supplier with valuation metrics (P/S ratio of 10.77, forward P/E of 29.83) reasonable relative to its strong earnings growth projections.
#### Alphabet: AI-Driven Software and Cloud Services Powerhouse
Alphabet, the owner of Google, Google Cloud, YouTube, Waymo, and Gemini, is significantly contributing to the increased demand for computer chips and ASML equipment. Alphabet's outlook as an AI-focused stock rests on its leadership in AI software, cloud services, and generative AI models such as those powering Google search, Google Cloud, and AI research.
Google Cloud revenue grew 28% year over year last quarter to $12.3 billion. Alphabet's AI initiatives are central to its strategy, driving growth in cloud services, advertising, and AI-powered consumer products, which are increasingly vital for enterprise and consumer adoption of AI technologies.
Market analysts generally view Alphabet as a key AI beneficiary, given its massive investments in AI research, proprietary large language models, and position in cloud computing. However, volatility and regulatory scrutiny remain potential risks.
#### Balancing Hardware and Software in the AI Ecosystem
Investors looking at AI-focused stocks should consider ASML for hardware-driven AI growth via semiconductor manufacturing equipment and Alphabet for software and services-driven AI expansion. This approach allows for a balanced approach to managing hardware cyclical risks and software market dynamics.
Over the past 12 months, ASML generated $33 billion in revenue, while Alphabet generated a total of $360 billion. ASML's stock currently has a P/E ratio of 33, potentially overvalued, but future growth prospects may bring it down to a more reasonable level. In contrast, Alphabet's stock currently has a P/E ratio of 20, potentially undervalued for long-term investment.
In conclusion, ASML's near-term growth is closely tied to the booming AI chip market and its unmatched position in EUV lithography, with strong 2025 revenue growth expected despite some margin risks and tempered long-term growth outlooks. Alphabet, while not detailed in this article, remains a cornerstone AI stock due to its leadership in AI software and cloud platforms, powering many AI applications, with a future outlook strongly linked to AI adoption and innovation across industries.
- The semiconductor manufacturing equipment provided by ASML is crucial for producing advanced chips that power AI applications in various sectors, including data centers, autonomous vehicles, and generative AI models.
- Despite a 14% decline in EUV sales in 2024, analysts predict a strong rebound in 2025, with EUV revenues projected to grow 41% year-over-year to €11.1 billion.
- In the technology sector, Alphabet, the parent company of Google and other AI-focused subsidiaries, is driving growth through its leadership in AI software, cloud services, and generative AI models.
- Over the next 12 months, investors considering AI-focused stocks may find a balance between hardware-driven growth via ASML and software and services-driven expansion through Alphabet, allowing for management of hardware cyclical risks and software market dynamics.
