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Another Wildly Exciting Semiconductor Stock

February 1, 2024

Subscribers will notice that I frequently change the scale on my candlestick charts. This is reflected in how I use charts. I am looking for signals that work, which can appear on charts using different periods for the candle stocks and moving averages. Since, arguably, there is no reason why charts should work we might as well be pragmatic in looking at what does work.

The smileys on the chart above capture the moment when the moving averages began to climb. A simple strategy is to buy/ hold the shares whenever the averages are climbing and be cautious when they are not.

The overall message from the chart, apart from the recent buy signal, is that since late 2008 semiconductor shares have been a good place to invest.

The number one reason is that semiconductors stand at the heart of the technology revolution. Especially as we move into the age of AI we need incredible computing power (supercomputers) to handle the explosion in data.

Data Generation Projected to Rise 90-Fold in 15 Years

The bar chart above includes projections for 2025. The figures are in zettabytes.

zettabyte is a multiple of the unit byte that measures digital storage, and it is equivalent to 1,000,000,000,000,000,000,000 (1021) bytes


The growth is staggering.

We need incredible computing power to handle this explosion of data.

Below is a quote giving the flavour of what is going on.

In the future society, information, digitisation, and intelligence will be further accelerated. The arrival of the era of intelligent connection of all things, the introduction of a large number of intelligent Internet of Things terminals, and the landing of AI intelligent scenarios will produce unimaginable massive data.

Such data will further stimulate the demand for computing power.

According to Roland Berger’s forecast, from 2018 to 2030, the demand for computing power for autonomous driving will increase 390 times, and the demand for smart factories will increase 110 times. The demand for computing power per capita in major countries will increase 20 times from less than 500 GFLOPS today to 10,000 GFLOPS in 2035.

Global computing power will reach 6.8 ZFLOPS by 2025, a 30-fold increase from 2020, according to Inspur AI Research Institute.

A new round of computing revolution is accelerating.

Leo Zhi, Disk Manufacturer, 1 August 2022

A New Round of Computing Revolution is Accelerating

The companies making this happen are in the semiconductor industry and businesses are growing incredibly. ASML describes itself as the most important tech company you have never heard of. What do they do?

We manufacture complex lithography systems critical to the production of microchips, unlocking the potential of people and society by pushing technology to new limits.

ASML, Investor Relations

ASML is very positive on the medium-term outlook.

We saw very strong order intake in the fourth quarter in support of future demand. To be able to follow the curve of the industry recovery, we are looking at the combined demand for 2024 and 2025. As mentioned last quarter, we highlighted 2024 as a transition year in preparation for the expected strong demand in 2025. We, therefore, continue to invest this year, both in capacity ramp and in technology to be ready for the upturn in the cycle.

Peter Wennink, CEO, ASML, Q2 2024, 24 January 2024

Some observers are even more bullish.

ASML had a solid quarter, with revenue and earnings up 12.5pc and 12.7pc year-over-year (YoY), ahead of the consensus figures.

The strength was due primarily to sales of new systems, which surged 20pc compared to flat sales for used equipment, giving evidence of demand for next-gen technology. ASML’s offerings include the dual-stage extreme ultraviolet lithography system, which can make the most advanced chips.

The net bookings are the news that got the market’s attention and suggests the guidance is cautious. Net bookings surged sequentially and compared to last year, surpassing expectations. The sequential gain is near 250pc, the YoY about 45pc, with strength expected in 2024 by the market, if not by ASML execs. Not only will the world’s foundries need to advance their technology, but expand their capacity to meet the demand for AI-friendly semiconductors.

Market Beat 26 January 2024

This is a strong chart. It is testing the former peak, set in 2021, but with the moving averages steepening the odds are good that a new period of rising prices is beginning.

Strategy – Another Exciting Share for Your Portfolio

Looking at the way shares are performing you could select US shares then USA technology shares and finally US semiconductor shares, with ASML as a European outlier.

Share Recommendations

ASML. ASML. Buy @ $886.50

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