Marcos Milla
Former Analyst at the Federal Reserve, ETF/Stock Newsletter Author
ASML and Lumentum are the better way to play the EUV lithography bottleneck, as better ETFs than the new EUV ETF are likely to launch soon, even though that ETF can reach $100. ASML had to develop a way to generate extreme ultraviolet light, which does not occur naturally on Earth's surface, to make more intricate next-generation chips. Ten stocks benefit from this bottleneck, including TSMC, ASML, Lam Research, Corning and Lumentum. x.com x.com
ASML cannot make enough EUV machines to meet demand, which it says will outrun supply through 2028. Its 2026 sales guide rose from €34-39 billion to €44-45 billion, and gross margin hit 57.5%. The combination of an EUV monopoly, demand outrunning supply and growing pricing power is rare. x.com
ASML's EUV R&D is starting to pay off through operating leverage. Q3 R&D fell as a share of sales, though one quarter is not a trend. Higher units, IBM sales and EUV/DUV prices put 2028 estimates well above the 2030 guide and ahead of consensus; shares look cheap at €1,530. Assuming 30% prepayment, liabilities imply €42-45bn of orders in 2026's first nine months, subject to invoicing lags. The proposed MATCH Act could restrict China sales; 2029-30 demand is less certain than 2028. x.com x.com … Show more
The Corgi Lithography & Semiconductor Photonics ETF offers broad exposure to the photonics stack as AI infrastructure increasingly depends on moving data efficiently between chips, racks and data centers. The actively managed fund spans lithography, equipment, inspection, photonics and optical networking rather than one niche, with $464M in assets and a 0.35% expense ratio. Top holdings include TSMC at 11.3% and ASML at 9.7%, plus optical names such as Lumentum, Corning and Coherent. x.com
ASML's fears about Chinese competition are noise: China's claim to compete rests on 20-year-old DUV tools, while nobody else has ASML's EUV machines. ASML is a trillion-dollar monopoly with a 20-year head start, so there is no real competition. The broader tech selloff reflects worries such as Nvidia backstopping OpenAI's buildout and open-weight models like Kimi K3, which are more noise than signal; even good open models need massive infrastructure. x.com
Lumentum's 109% year-on-year growth and sold-out capacity through 2029 make selling its AI optics exposure questionable. Bloomberg reported Marvell is in advanced talks to buy it; the appeal depends on the price, especially when holders of an $80 billion Lumentum would become holders of a $320 billion-plus Marvell growing 37%. x.com
ASML faces moat erosion now that China has a homegrown alternative to its machines. The Information reports a state-backed Shanghai company has started mass-producing DUV lithography tools. Chinese fabs stockpiling older DUV tools had become a major revenue driver, with China at 36% of sales in 2024 and 29% last year. Output is tiny, about five machines this year and maybe twenty next. But once a second supplier exists, the question shifts from "no alternative" to "for how long." x.com
ASML's EUV moat is hard to replicate because making EUV light is only one part of a production tool: sustained fab uptime matters, and Zeiss optics are the harder moat. Langdao Silex showed a Chinese light source with 90% local components but disclosed no power figure. ASML's production sources run at about 600W; its February demo reached 1,000W with a path to 1,500W. Langdao staff put mass production three to five years away. x.com
Intel getting High-NA EUV working secures ASML's technological moat for the next decade, mattering more than the raised guidance that moved the stock. ASML confirmed High-NA has entered commercial production with lead customer Intel, removing the biggest technical overhang on whether its $350M+ machines work in high-volume manufacturing. Q2 net sales of €9.3 billion and EPS of €7.59 beat estimates with a 54% gross margin, and FY2026 revenue guidance rose to €43-45 billion from €34-39 billion. … Show more
ASML may have topped, since semicap thrives on shortage and would be hit hardest in an overbuild. Then earnings acceleration from memory and fab projects stops or reverses; the labs' leading-edge chase may be at its apex, positioning is bullish and the moat is threatened. Bullishness on Korean, US and Taiwan fab projects makes sense for now. But if the cycle top is confirmed and labs change how they chase the frontier, or token deflation kills some labs, the shortage can end sooner. x.com x.com … Show more
Optics and photonics should be among AI's biggest winners as faster GPU networks need optical connections that suppliers cannot expand quickly enough. Lumentum says some components are sold out through early 2029; Sivers is investing $30M to target more than 100M lasers a year, with operations expected in Q4 2027. Potential US restrictions on Chinese transceivers could reshape supply in 2027. Applied Optoelectronics and Sivers are the favorites. x.com x.com
