This Artificial Intelligence (AI) Stock Is Already Seeing Demand Stretching Into 2030

There have been growing concerns about artificial intelligence (AI) stocks lately, including fears that a bubble may be bursting. AI stocks have struggled recently as investors worry about how long their strong results can continue.

However, one major technology company says customers are already interested in placing orders years ahead because of the need for AI chips. That company is ASML Holding (NASDAQ:ASML). Its lithography machines are essential for making advanced chips. ASML recently reported its latest financial results, showing that the company has continued to grow strongly and that demand could remain high for years. Customers are already placing orders well in advance.

The big question is whether this technology stock is still a good investment given its high valuation. I'll examine that below.

ASML's results have been strong, but is its future growth already reflected in the stock price?

When buying a stock, investors need to look beyond how well the company has performed recently. If a stock has a high valuation, its price may already reflect expectations for strong future growth. Unless something new suggests that the company could grow much more than investors already expect, the stock may not rise further or be a good investment.

ASML is one of the world's largest technology companies, with a market value of more than $630 billion. Its growth rate was above 55% last quarter. The stock currently trades at 40 times its earnings, a high level that suggests investors are already paying extra for expected growth. Its forward price-to-earnings (P/E) ratio, which compares its share price with the earnings analysts expect it to make over the next year, is 29. That is also high. The average P/E ratio for the S&P 500 is currently a little above 19.

However, the company gave investors a reason to remain hopeful about future growth. CEO Christophe Fouquet said investments in AI are driving strong orders. He added, "In light of their demand visibility, some customers are expressing an interest in placing orders with us for 2029 and even 2030."

Why ASML stock may still be worth buying

ASML's stock may be expensive, but the company holds a leading position in its market and has a strong advantage over competitors. Its lithography machines are essential to the technology industry. Customers are seeking to place orders years in advance because they expect demand to continue well into the future.

Investors already expect some growth from ASML, but the company is seeing demand extending into 2030. This suggests that the stock could be worth an even higher valuation because of its potential for steady growth and stability.

David Jagielski, CPA does not own any of the stocks mentioned. The Motley Fool owns shares in ASML and recommends the stock. The Motley Fool has a disclosure policy.