ASML, a leading supplier in the global semiconductor sector, experienced its most significant market decline in 26 years last week. The Dutch tech firm issued a warning regarding a slower recovery in the semiconductor market, reducing its revenue forecasts for 2025 in a results announcement that was posted a day earlier than intended.

The company’s shares dropped over 15 percent, now trading roughly a third lower than their peak of €964 recorded in June. This raises the question: is it an opportunistic time to buy during this dip, or does this sell-off highlight deeper concerns regarding semiconductor valuations?

Founded in the 1980s as a partnership between Philips and ASM International, ASML gained independence in 1995 and became a publicly traded company. The firm specializes in “lithography technology,” which is critical in creating the circuit patterns on chips, along with offering software and ancillary services. ASML currently commands nearly 90 percent of the global market for “extreme ultraviolet” lithography.

The surge in global chip demand has significantly benefited ASML in recent years, with revenue rising from €11.8 billion in 2019 to €27.6 billion by the end of last year, while net income escalated from €2.6 billion to €7.8 billion during the same period.

However, investor confidence has wavered as concerns about a potential slowdown take root. ASML revised its forecasts downward, citing that third-quarter orders were only half of what analysts had anticipated. Many experts argue that shareholders should not expect the phenomenal growth rates seen previously, given that ASML achieved a compound annual growth rate of 22 percent from 2016 to 2023. Nonetheless, low double-digit sales growth seems feasible as new chip fabrication plants (or “fabs”) emerge, prices increase, and complex systems drive further growth in service revenues.

As long as ASML continues to enhance the productivity of its machinery, it can justify higher pricing. As highlighted by analysts at Morningstar, if ASML raises its equipment prices by 20 percent but productivity improves by 40 percent, the overall cost per wafer for chip manufacturers will still decrease.

While a slowdown in growth seems plausible, it doesn’t rule out future expansion. However, investors must remain cautious of wider chip industry issues that could impact ASML, particularly the influence of Intel.

Wall Street analysts estimate Intel to be ASML’s third-largest customer, accounting for 10 to 20 percent of its revenue, following TSMC and Samsung. Recently, Intel revealed it would cut its capital expenditures by 20 percent, a move expected to impact ASML, although some demand may be absorbed by competitors like TSMC.

Additionally, there are risks associated with China’s role in the semiconductor market. China’s share of ASML’s annual sales typically hovers around 14 to 18 percent, but last year’s figures showed a spike to 29 percent due to increased investments in its domestic chip industry. ASML has indicated that this figure is likely to revert to normal levels next year. Furthermore, geopolitical factors are at play; over the past year, shipments of ASML’s advanced lithography machines have faced restrictions from both the Dutch and U.S. governments to limit China’s development of cutting-edge artificial intelligence technologies.

Currently, ASML shares are trading at 34.8 times expected earnings, below its own five-year average of 40 and significantly cheaper than popular chip firm Nvidia, which stands at a multiple of 48.5.

The recent sharp decrease in ASML’s stock has also triggered declines in shares of Nvidia, Intel, and TSMC, reflecting growing anxiety about semiconductor valuations. However, given ASML’s commanding position in a crucial segment of the supply chain, the company appears resilient enough to navigate a potential downturn. For long-term investors, ASML continues to present a viable growth opportunity.

Investing in the BlackRock Greater Europe Investment Trust

For those hesitant to invest directly in ASML, the BlackRock Greater Europe Investment Trust may offer a diversified option.

This £556 million fund lists ASML as its second-largest holding, constituting 7.2 percent of its assets as of late August. The largest holding is Danish pharmaceutical giant Novo Nordisk, responsible for weight-loss drugs Wegovy and Ozempic, making up 8.9 percent of assets. The data analytics company Relx follows as the third-largest holding, representing 6.5 percent.

The investment trust focuses on quality growth companies—those that management believes offer robust returns on equity and possess solid growth prospects.

Approximately 20 percent of the portfolio is invested in France and a similar share in the Netherlands, while the UK comprises only 6.5 percent. However, few companies within the portfolio are solely European-focused; many, including ASML, are global leaders in niche markets.

The investment strategy has yielded positive results, with the fund outperforming its benchmark, the FTSE All World Europe ex UK index, delivering a total return of 63 percent over five years compared to the benchmark’s 51 percent.

The trust features a low dividend yield of only 1 percent, as income generation is not its primary strategy. Nevertheless, it has consistently raised shareholder payouts since its inception in 2004 at an annualized rate exceeding 7 percent, according to Kepler’s analysis. Over the last decade, this increase has moderated to around 4 percent, with dividends distributed biannually in December and May.

The fund’s shares currently trade at a 7 percent discount to their net asset value, compared to an 11 percent average discount among similar European stock investment trusts, indicating a growing preference among investors for this fund. The combination of a well-diversified portfolio of quality growth firms with a proven track record of returns deserves consideration.