Summary
- ASM International is a key enabler of the 2nm GAA chip transition, with over 50% global ALD market share and rising customer adoption.
- The company exceeded Q1 2025 expectations with record margins and €264 million in free cash flow, supported by robust GAA and HBM demand.
- Despite geopolitical tensions, Chinese orders remain resilient, and ASM is expanding manufacturing flexibility to mitigate export risks.
- The balance sheet is pristine, dividends are rising, and the company is gaining market share in SiC epitaxy ahead of the next EV investment cycle.
- With strong structural tailwinds but a rich valuation, ASM offers GARP investors exposure to foundational AI chip technologies with disciplined execution.
Introduction
ASM International has been active in the semiconductor industry for more than 50 years but rarely has the company been as central as it is now. The Dutch specialist in deposition technology, and in particular atomic layer deposition (ALD), is a silent force behind the new generation of AI chips. While investors are mainly focusing on well-known names such as ASML, Nvidia or TSMC, ASM is steadily building a dominant position in a niche that is essential for the further scaling and efficiency of semiconductors.
The share has more than doubled since the beginning of 2023. The direct driver: explosive growth in demand for equipment for 2nm Gate-All-Around (GAA) chips which are crucial for AI processors. In the first quarter of 2025, ASM exceeded expectations with 26% revenue growth (constant currency), a record margin of 53.4% and a free cash flow of €264 million. At the same time, a new round of geopolitical tensions is raging with US export restrictions to China. But management remains calm, order intake is holding up, and the balance sheet is in excellent health.
My thesis: ASM is a textbook example of a GARP stock with solid operational traction. Despite a solid valuation, the stock is attractive to investors who believe in the structural growth trend of AI, energy efficiency and chip complexity. This is worth a long ride.
GAA, AI And Why ASM Is Crucial
The big leap in chip design is called GAA. Unlike FinFET transistors, which were the heart of the past generation of chips, GAA architectures enable better control of current around nanosheet channels. This is crucial for combining the explosive computing power of AI with lower power consumption. And it is ASM that provides the technology that makes this architecture possible: ALD can be used to deposit ultra-thin, uniform layers at the atomic scale which is essential for the production of GAA transistors.
In Q1 2025, more than 20% of ASM’s order intake was directly connected to the 2nm GAA node. Major customers such as TSMC, Samsung and Intel are scaling up rapidly, and ASM is in their front line. CEO Hichem M’Saad emphasized in the latest earnings call that some customers are already seeing more demand for 2nm than they saw for 5nm and 3nm. It speaks volumes about the speed at which this new generation is breaking through, and ASM’s critical role.
That this technology intensity is here to stay is also evident in the fact that ASM is already delivering tools for the next step: 1.4nm nodes. The industry is only at the beginning of what will likely be a multi-year increase in ALD intensity. Each generation requires more layers, more precision and therefore more tools. And ASM is the market leader in this segment, with a global market share of over 50%.
Memory, China And The SiC Story
But ASM is more than just GAA. The company also has a strong position in the memory landscape (particularly in HBM DRAM) which powers the computational power of AI models. In 2024, sales to memory customers exploded, accounting for 25% of total equipment sales. A slight decline is expected in 2025 but demand for HBM remains robust, it’s not susceptible to the usual DRAM cycles that make the industry so volatile. This niche is growing not because the PC market is recovering but because data centers are reinventing their infrastructure around AI.
The Chinese market deserves a separate section. ASM was one of the few European companies to fully benefit from the surge in investment in Chinese foundries in 2023 and 2024. While new US export restrictions are a dampener, the picture is less dire than feared. Orders from China held up well in Q1, and management still expects China to account for a market share in the high 20s by 2025. If the US government does indeed go ahead with additional tariffs, ASM already has a trump card: the company can assemble tools locally in the US and is working on a new production location in Scottsdale. This geopolitical flexibility is a competitive advantage.
Less visible but strategically relevant is the position in SiC epitaxy. In the niche market of power electronics (especially for electric vehicles) ASM supplies the tools to apply silicon carbide layers to wafers. This market is currently weak with postponed investments after previous overcapacity. But ASM has gained market share precisely during this dip. The new PE208 platform for 200mm SiC wafers will be ready when the next investment cycle comes around. According to the company, ASM became the market leader in SiC epitaxy in 2024 based on recent third-party research.
ASM International Delivers, But Management Stays Measured
ASM exceeded expectations with impressive results. Revenue rose to €839 million in Q1, above the expected range. Gross margin improved to a record high of 53.4%, thanks to a favorable product mix and the fruits of years of cost reductions. Operating margin came to 31.7%, and excluding the non-cash impairment on ASMPT, adjusted net income was €192 million.
More importantly, cash flow is solid. With €1.15 billion in cash and no debt, ASM has a financial buffer that most peers can only dream of. The company already generated €264 million in free cash flow in Q1, which is more than enough to finance the annual dividend and the €150 million share buyback program.
Still, management is cautious. Guidance for 2025 remains at +10% to +20% revenue growth (in constant currency). The lower end of this range is almost certain but the upper end requires additional windfalls: an acceleration in HBM orders, or an unexpected recovery in the power/analog market. Until then, ASM is mainly dependent on the progress in GAA. And that remains strong. Q2 will again show sequential growth.
As an investor, you should take into account a certain volatility. Due to the relatively short order book horizon (about 2 quarters), the stock can react quickly to news about geopolitics, export restrictions or customer delays. But at its core, the growth factors are structural.
Dividends and Valuation
ASM’s payouts are growing steadily. A dividend of €3.00 is proposed for 2024 (+9% YoY), good for a modest yield of 0.6%. That is below the level of sector peers such as BESI (2.1%) or Tokyo Electron (2.6%). But the difference lies in the payout policy. ASM only pays out ~20% of its profit, which leaves room for R&D, acquisitions and buyback programs.
The valuation is the only sore point. With a forward P/E ratio above 45x, ASM is not cheap. But that premium is not unjustified. The gross margin is higher than at Applied Materials or Lam Research, revenue is growing double-digit and the cash position is superior.
A comparison with peers helps to gauge relative attractiveness. Lam Research and Applied Materials trade around 19-21x earnings but has less exposure to the fast-growing ALD market. BESI, while cheaper in terms of P/E ratio, has sharply declining earnings and is more deeply in a cyclical phase. ASM combines the advantages of a pure-play innovator with the stability of a solid free cash flow machine. That justifies a higher multiple provided that growth expectations are met.
Conclusion
ASM International is anything but a hype stock. It is a growth player in an indispensable niche with proven technology, strong customer relationships and a conservative financial policy. The growth in ALD and epitaxy is not a temporary phenomenon; it is a structural shift in chip production. The coming years will only demand more layers, more precision and therefore more ASM.
Although the valuation is high, the company remains attractive to those who believe in sustainable profit growth and are prepared to pay a premium for quality. The dividend is growing steadily and the balance sheet offers cover against any economic shock. At the same time, there is geopolitical risk: a new wave of sanctions or a sudden slowdown at major customers could hit the share price hard. But management has shown that it is prepared for this.
My view is clear: Buy. Not for the short term investor but for the investor looking for exposure to the AI chip revolution. In an increasingly complex world, ASM is a rare combination of simplicity and power. The market sees that, and sooner or later the stock will prove again why it deserves that premium.