ASML Stock Might Be the Safest Chip Play at This Price

Investors in the technology sector share one common pain point across the board in today’s market: as the recently rolled-out trade tariffs by President Trump start to hurt forecasts and sentiment in the United States economy, some of the high-flying names in this space have now become the subject of uncertainty and declining sentiment.

As is clear, most of this effect has occurred in the semiconductor and chipmaking industries.

However, this doesn’t mean that the entire industry is painted with the same brush, and that is where investors can find some level of safety and opportunity by identifying some of the most beaten-down stocks that have likely already priced in some of the worst-case scenarios, leaving them with net upside exposure moving forward.

As it turns out, other participants in the market think along the same lines.

This is where a stock like ASML Holding (NASDAQ: ASML) becomes a great consideration for portfolios and watchlists alike, offering investors a fantastic risk-to-reward setup. This doesn’t mean that the effect of tariffs on semiconductors has not (or will not) reached ASML like other names, but what today’s opportunity means is that the bearish case is likely already reflected in today’s stock price.

Price Action Opens an Opportunity Gate

Comparing ASML stock to that of other semiconductor industry peers, such as NVIDIA Co. (NASDAQ: NVDA), can provide a new perspective for investors seeking to avoid some of the current market noise. Over the past month alone, ASML has underperformed NVIDIA by as much as 15%, and that theme only amplifies when stretched to the entire year.

Over the past 12 months, this underperformance has been around 40%, with the S&P 500 index also trailing ASML by more than 30%. Now, considering that most of this underperformance started to form as of the beginning of 2025, investors can credit the bulk of this market division to the trade tariff theme today.

Considering that ASML has traded down to 65% of its 52-week high, the stock is in an official bear market according to Wall Street’s definition (which is a 20% decline from 52-week highs). This leaves very little room or reason for the bearish traders in this stock to stick around much longer.

That might be the reason why ASML stock’s short interest declined by 1% over the past month, which may not sound as much on a percentage basis but definitely is a subtle sign of bears being more careful now that most of the pessimistic views may have already been baked into the company.

Optimism Stirs a Capital Rotation in ASML

As these bearish traders began to exit the stock after its decline, some institutional buyers stepped in to replace them. As of mid-May 2025, allocators from First Manhattan decided to come into ASML stock and boost their position by as much as 61% as of the reported date, leaving them with an entire holding of up to $469.2 million.

New buying may lead investors to assume that the bottom is nearing for ASML safely, but that’s not the only sign of optimism starting to develop for one of the most undervalued names in the semiconductor industry, making it potentially the safest in the peer group.

Wall Street analysts have maintained their consensus price target of $906 per share on ASML stock despite the volatility, which implies as much as a 21.3% upside from the current stock price. Of course, these are all opinions in the end, with analysts earning their reputations while also being cautious at the same time.

A different perspective on ASML, which carries more conviction, relates to where the market is valuing ASML stock today, particularly in comparison to its peers. By trading at a price-to-book (P/B) ratio of up to 14.7 times, ASML commands a steep premium compared to the rest of the computer sector and its average valuation of 6.8 times.

One thing that investors need to consider is that any success NVIDIA might have in the coming quarters will likely be tied to similar success and price action in ASML, as current valuation premiums will need to be justified through improved business and financial outlooks.

This should put some value investors at ease, as most would argue that the stock may seem expensive compared to peers without realizing that markets typically have a good reason to overpay for names they believe can outperform the peer group and the broader market as well.

Keeping in mind that NVIDIA just reported a revenue and earnings beat in the most recent quarter, investors have a new reason to stay bullish on ASML, also backing the decisions made by these institutional buyers recently.

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