Key Points

The memory chip shortage remains a primary constraint for artificial intelligence advancements.
SK Hynix holds a significant position in the memory chip sector.
Memory stocks still show growth potential but ASML stands out as the stronger choice for those with extended investment horizons.
10 stocks we prefer over ASML ›

As of market close on July 9 the seven top-performing S&P 500 stocks year to date include Sandisk Dell Technologies Micron Technology Western Digital Seagate Technology Holdings Intel and Marvell Technology. Each of these firms participates directly in or gains from the surge in memory chips supporting AI tasks across data centers and consumer devices.

Memory chip demand along with energy needs represents the chief hurdles facing the AI sector at present. High bandwidth memory and dynamic random-access memory chips serve as active memory for processing large AI training and inference datasets. Meanwhile AI NAND flash enables extended large-scale data retention and access.

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SK Hynix is a complete AI memory supplier. It continues expanding its HBM capacity to boost AI chip efficiency. Demand for SK Hynix memory chips greatly exceeds available supply creating a multi-year growth path that has driven the firm to a $1 trillion valuation.

On Friday July 10 SK Hynix began trading on the Nasdaq following a U.S. share offering. SK Hynix has risen 241.5 percent year to date as of market close on July 9. If included in the S&P 500 it would rank as the fourth-best performer ahead of Western Digital and just behind rival Micron.

SK Hynix will not enter the S&P 500 as a South Korean firm similar to how Taiwan Semiconductor Manufacturing stays outside the index. It will likely gain quick entry to the Nasdaq-100 in coming weeks much like Space Exploration Technologies which went public on June 12 and joined the Nasdaq-100 on July 7. The Nasdaq-100 tracks the 100 largest non-financial firms by market cap on the Nasdaq exchange.

SK Hynix holds substantial promise. Yet ASML represents an even stronger Nasdaq-100 selection for investors seeking a core AI stock to hold for at least five years.

Image source: Getty Images.

ASML stands in a class by itself

Netherlands-based ASML ranks as Europe's most valuable company. Although absent from the S&P 500 due to its non-U.S. base it counts among the top 15 largest positions in the Nasdaq-100.

ASML does not create or produce chips. Instead it manufactures sophisticated equipment required for the lithography phase of semiconductor fabrication. Lithography ranks among the most intricate and vital stages in chip production as it transfers patterns onto silicon wafers.

ASML maintains a near-monopoly on extreme ultraviolet machines that employ reflective optics to direct light within a vacuum rather than bending it. EUV technology generates an extremely short 13.5-nanometer wavelength versus roughly 193 nm for deep ultraviolet systems.

ASML's high-numerical-aperture EUV tools deliver even greater precision for manufacturing next-generation AI chips at volume. Shorter wavelengths allow chip makers to etch finer denser elements onto key microchip layers in one pass. DUV systems require multi-patterning with multiple steps and added time to reach comparable accuracy. Although EUV tools carry high costs they deliver superior performance and better economics across extended service periods.

DUV tools resemble driving nails by hand with a hammer while EUV systems function like a nail gun. A hammer suffices for hanging artwork but a nail gun proves essential when constructing a building. EUV equipment exceeds requirements for standard chip production lacking tiny transistors and interconnects. Yet these tools prove essential for AI chip fabrication. Multiple firms produce DUV equipment but only ASML mastered EUV technology supplying chip designers the advanced capability needed to advance manufacturing dramatically.

As AI usage expands fabrication plants fulfilling AI chip orders will require upgrades to ASML's advanced EUV systems. Newer facilities will likely adopt EUV tools as standard. Just last month Elon Musk spoke with ASML staff during a discussion with ASML CEO Christophe Fouquet regarding the proposed Terafab partnership involving Tesla SpaceX and SpaceX-owned xAI.

Terafab would become the largest chip production site dedicated to AI chips for SpaceX orbital data centers. Because Terafab would handle AI workloads it would require ASML's most advanced equipment. Given ASML's multi-year order backlog Musk effectively signaled readiness to ramp production in anticipation of major future orders.

Every path points to ASML

Semiconductor equipment makers such as Applied Materials and Lam Research compete in deposition and etching steps. Yet no rival approaches ASML's dominance in EUV lithography.

Most notably ASML lithography systems are required to fabricate all varieties of AI chips including logic devices such as GPUs CPUs and custom AI processors like Alphabet's Tensor Processing Units as well as HBM DRAM and NAND memory chips produced by SK Hynix.

Each quarter ASML reports net system sales by logic and memory segments. In the first quarter of 2026 memory rose to 51 percent from 42 percent in the first quarter of 2025 while logic fell from 58 percent to 49 percent. The strength of ASML's model lies in its gains whenever AI chip demand rises. It remains largely unaffected whether custom AI chips from Alphabet reduce GPU share or whether Intel gains ground on Taiwan Semiconductor or SK Hynix advances versus Micron. ASML has already profited from relentless AI compute demand and now also benefits from the memory chip expansion.

In short purchasing SK Hynix offers a direct wager on memory chip demand continuing to exceed supply and on SK Hynix maintaining position amid intense rivalry. Purchasing ASML provides a broad method to invest in greater AI chip development higher production volumes and consequently increased deployment of ASML equipment across chip fabs.

ASML justifies its premium valuation

ASML's role in the AI supply chain is widely recognized. The stock has climbed 125 percent over the past year and commands a premium valuation with a forward price-to-earnings ratio of 49.5 compared with 49.2 for Applied Materials and 43.5 for Lam Research.

ASML may require earnings growth to align with its valuation before supporting further gains. For investors maintaining a long-term outlook however it emerges as arguably the premier semiconductor stock to acquire and retain because next-generation AI logic and memory chips rely on ASML systems to realize their designs.

Should you purchase ASML shares at present?

Before purchasing ASML shares consider the following:

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Daniel Foelber holds positions in ASML. The Motley Fool holds positions in and recommends ASML Alphabet Applied Materials Intel Lam Research Marvell Technology Micron Technology Taiwan Semiconductor Manufacturing Tesla and Western Digital. The Motley Fool maintains a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq Inc.