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Should You Expect Strong Long-Term Upside for ASML Holding N.V. (ASML)?

Baron Funds, an investment management company, released its “Baron Fifth Avenue Growth Fund” fourth quarter 2024 investor letter. A copy of the letter can be downloaded here. The fund experienced an excellent quarter to end another successful year. The fund increased 11.7% (Institutional Shares) in the fourth quarter compared to a 7.1% gain for the Russell 1000 Growth Index and a 2.4% increase for the S&P 500 Index. For the full year, the fund returned 37.8% compared to 33.4% and 25.0% gains for the indexes. In addition, please check the fund’s top five holdings to know its best picks in 2024.

In its fourth quarter 2024 investor letter, Baron Fifth Avenue Growth Fund emphasized stocks such as ASML Holding N.V. (NASDAQ:ASML). ASML Holding N.V. (NASDAQ:ASML) is an advanced semiconductor equipment systems manufacturer for chipmakers. The one-month return of ASML Holding N.V. (NASDAQ:ASML) was 6.82%, and its shares gained 22.20% of their value over the last 52 weeks. On February 21, 2025, ASML Holding N.V. (NASDAQ:ASML) stock closed at $737.21 per share with a market capitalization of $290.854 billion.

Baron Fifth Avenue Growth Fund stated the following regarding ASML Holding N.V. (NASDAQ:ASML) in its Q4 2024 investor letter:

"ASML Holding N.V. (NASDAQ:ASML) is a Dutch company that designs and manufactures photolithography equipment for semiconductor manufacturing. While ASML is the leader across all types of lithography, most importantly, it is the only manufacturer of extreme ultra-violet lithography tools, which are critical for the manufacturing of leading-edge chips. Shares fell 16.6% during the fourth quarter (finishing the year down 7.7%) on reduced guidance for 2025 as well as growing investor concerns about the potential impact of U.S. government restrictions on Chinese demand and the possibility of peaking lithography intensity. Despite near-term noise, we believe that the growing demand for chips in general and AI chips in particular will continue to support long-term growth for the wafer fab equipment industry with ASML’s competitive positioning remaining unassailable. While lithography as a percentage of capital expenditure may decrease from current levels, the chip layer count requiring lithography will continue to increase, in our view, as chips continue to become more complex. As a monopoly on critical lithography tools supporting an industry with growing demand fueled by the proliferation of AI, we see strong long-term upside for ASML."