1 Super Semiconductor Stock to Buy Hand Over Fist (Hint: Not Nvidia)

It's hard to argue against Nvidia. An absolute juggernaut, Nvidia retains a dominant leadership position with respect to designing semiconductors, and its contributions to the growth of the artificial intelligence (AI) industry are nearly impossible to overstate.

To even suggest that Nvidia doesn't warrant one of the top spots on most investors' buy lists seems an unproductive exercise, so I'm not even going to try it. But there is a case -- a strong case, in fact -- to be made that another semiconductor stock is worth purchasing right now instead of Nvidia stock.

Image source: Getty Images.

The ABCs on ASML

While Nvidia has name recognition even among those who don't closely follow the tech industry, ASML (NASDAQ: ASML) is a business that semiconductor-focused investors should get to know better. Just as Nvidia is a stalwart among companies that develop semiconductor architectures, ASML is a leader in providing the equipment, software, and services that make the large-scale fabrication of microchips possible.

Where ASML stands out from its peers is that it's the only company that manufactures extreme ultraviolet lithography (EUV) machines. Unlike deep ultraviolet lithography (DUV) machines (of which there are several manufacturers), EUV systems use light at a wavelength of 13.5 nanometers, making the printing of the most complex and essential layers on the world's most sophisticated microchips possible. ASML acknowledges that the EUV systems "simplify our customers' manufacturing processes, compared to complex multiple patterning strategies using DUV immersion systems."

To lay claim to being the only manufacturer of equipment that is vital to advanced semiconductor fabrication is impressive, and it significantly distinguishes ASML from other companies that also provide hardware and services for the semiconductor industry.

In this regard, ASML shines brighter than Nvidia

There's no denying that Nvidia spins off boatloads of cash. Thanks to the incredible growth of AI, Nvidia has seen its free cash flow soar from $26.9 billion in fiscal 2024 to $60.7 billion in fiscal 2025. ASML, too, has recognized impressive free cash flow growth. After generating free cash flow of 3.2 billion euros in 2023, ASML reported free cash flow of 9.1 billion euros in 2024.

It's important in a comparison between Nvidia and ASML, however, to remember that Nvidia generates considerably more revenue from which it can generate free cash flow. In fiscal 2025, Nvidia reported revenue of $130.5 billion, while ASML reported sales of 28.3 billion euros (about $32.9 billion) in 2024.

But when assessing the two companies on how much free cash flow per share they generate, ASML stands out.

ASML Free Cash Flow Per Share (Annual) data by YCharts.

Furthermore, ASML appears to be a more compelling opportunity right now with respect to the two companies based on free cash flow yields. On a trailing-12-month basis, ASML has a 2.4% free cash flow yield compared to Nvidia's 1.6% free cash flow yield. For investors seeking a bargain opportunity, ASML represents a better option right now than Nvidia.

Now's the time to load up on ASML

From its robust competitive advantage in providing the only EUV lithography systems to its 2.4% free cash flow yield, ASML provides investors with a great buying opportunity right now. Another illustration of why today is such a great time to buy ASML stock is its valuation. Currently, shares of ASML are trading at 38 times trailing earnings. Admittedly, the multiple doesn't make ASML stock seem like a bargain-bin opportunity, but when juxtaposing it with the stock's five-year average P/E of 39.6, the valuation seems quite appealing.

There's no doubt that Nvidia stock is a worthy addition to tech-focused investors' portfolios, but for today, investors would be better advised to click the buy button on ASML stock.

Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML and Nvidia. The Motley Fool has a disclosure policy.