ASML beat second-quarter earnings on both the top and bottom lines, with 54% gross margins. The Dutch chip-equipment maker raised its full-year net sales forecast for the second time this year, pointing to AI demand for chips. It reported record order visibility. Despite all of this, the stock gave up its entire gain and turned negative on the session.
The overnight and pre-market action told a different story than the close. As a Dutch company, ASML traded overseas first and was up close to 5% at one point in the pre-market, then sold off through the day.
Why great numbers still sold off
This looks like sell-the-news, and it may set the tone for the whole earnings season. Last season, AI-driven earnings reports drove the market higher and pulled it out of the slump caused by the Iran war. Now these fantastic numbers are simply expected, so beating them isn't enough to move the price up. The market looks at AI companies and thinks, yes, the numbers are great, but is that truly enough? Investors are hunting for cracks in the AI trade.
ASML sits at the top of the funnel of that trade, much like the PPI inflation data released the same morning sits at the top of the pricing chain. It is the first link: it sells the machines that make semiconductor chips to firms like Taiwan Semiconductor, one of its biggest customers. That flows down to chipmakers like Nvidia and AMD. Strong demand at this top layer signals the AI build-out is still in full swing and going nowhere.
The one bearish argument
Scanning the report for cracks turns up nothing. It was about as flawless as it gets, and the standout was another raise to future guidance. The weakness is sentiment, not fundamentals. A year ago, Google, Meta, and Amazon were praised for pouring money into AI, and their stocks rose when they raised spending. A few weeks ago Meta said it spent less on AI than planned and got praised for that instead. The mood has flipped on AI investment across the chain.
Investors are running to the exits first, worried this ends like the late-1990s dot-com era, with overspending on CapEx and stretched valuations. But today's earnings trends look very different from what showed up right before that bubble burst, so people are exiting too soon.
The only bearish case you could make after these numbers is "this is as good as it gets, it can't get better." There is no evidence that's true right now. As long as the trends keep improving and accelerating, you want to own these names, and ASML in particular. It is the premier picks-and-shovels play for AI: it holds the only machines that do extreme ultraviolet (EUV) lithography, the process used to make Nvidia, Broadcom, and AMD chips.
Visibility through 2028
CEO Christophe Fouquet said customers are speeding up their CapEx spending because they have what he called unprecedented visibility, with EUV machine orders booked out through 2028. That level of booking is a strong sign AI spending isn't peaking soon. The momentum is powerful, and nothing is slowing on a rate-of-change basis. Looking at earnings expectations over the past 40 years, prior market tops did not look like this, when expectations are still improving, there is more room to run.
At current levels, chasing the stock here isn't the move, and buying at these prices isn't happening. But ASML stays interesting because the numbers back the price action, and that action has been very strong.
