More importantly, sales of smartphones and PCs are expected to improve as well in the long run. ASML estimates that the smartphone market could clock an annual growth rate of 5% through 2030, while the PC market could witness a 4% annual growth over the same period.

All these factors are expected to lead to robust growth in wafer demand in the future. More specifically, ASML expects annual demand to grow by 780,000 wafer starts per month (WSPM) every year from 2025 to 2030. WSPM refers to the output of a semiconductor plant, so the increase in this capacity means that the demand for ASML’s machines should remain robust going forward.

As such, it won’t be surprising to see the company eventually achieve its 2030 targets. If ASML can hit the midpoint of its 2030 guidance and achieves 52 billion euros in revenue, its top line would nearly double from this year’s estimated figure of 28 billion euros. That would translate into a compound annual growth rate of almost 11%.

Moreover, the midpoint of the gross margin range of 56% to 60% in 2030 would also be a nice improvement over the 52% figure it is forecasting for 2025. All this indicates that ASML is on track to clock healthy top- and bottom-line growth going forward thanks to the secular growth of the semiconductor market, which it believes could cross $1.05 trillion in revenue in 2030 from $679 billion in 2025.

ASML’s poor stock market returns in 2024 mean that investors can get their hands on this semiconductor stock at a relatively attractive valuation. The stock is now trading at 34 times trailing earnings, a discount to its five-year average earnings multiple of 42.5. Also, the forward earnings multiple of 27 points toward an improvement in its bottom line, and the reading is lower than the tech-laden Nasdaq-100 index’s forward earnings multiple of 30.7.

So, savvy investors looking to add an AI stock to their portfolios can consider accumulating ASML given its sunny, long-term prospects. Of course, the stock’s performance can be affected by the short-term challenges in the semiconductor industry, but it is worth remembering that the company’s machines help make advanced chips that go into applications such as AI, which is why it would be a smart idea to keep the bigger picture in mind.

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

Is It Finally Time to Buy This Beaten-Down Artificial Intelligence (AI) Stock? was originally published by The Motley Fool