We recently compiled a list of the 35 AI Superstars According to Goldman Sachs. In this article, we are going to take a look at where ASML Holding N.V. (NASDAQ:ASML) stands against the other AI superstars according to Goldman Sachs.

US technology stocks have surged dramatically this year, largely driven by the growing excitement surrounding generative artificial intelligence (AI). However, according to research by investment firm Goldman Sachs, this rise is not indicative of a financial bubble like those of the past. The performance of these companies is expected to continue delivering solid returns to investors, fueled by the rise of AI superstars outside of the magnificent seven, among smaller tech firms and in non-tech sectors as well. However, Peter Oppenheimer, the bank's chief of global equity strategy and the head of macro research in Europe, has advised investors to diversify their portfolios to manage risk.

While tech stocks have been dominant, contributing 32% of global equity returns and 40% of US equity returns since 2010, these returns are underpinned by strong financial fundamentals rather than speculative bubbles. The earnings per share for the tech sector have increased by 400% since the peak before the 2008 financial crisis, far outpacing other sectors, which collectively saw only a 25% increase. A key driver behind the outsized returns in recent years has been a small group of hyperscale companies, particularly those in software and cloud computing. These companies have leveraged their vast resources and high profitability to dominate the market, with recent performance surging even further due to optimism around AI.

Read more about these developments by accessing 30 Most Important AI Stocks According to BlackRock and Beyond the Tech Giants: 35 Non-Tech AI Opportunities.

This has led to rising valuations, largely concentrated among a narrow group of market leaders. Peter Oppenheimer observes that this pattern mirrors historical trends in technological innovation. From the construction of canals in the 18th century to the adoption of the telephone, new technologies often attract vast capital and competition. Although this does not always result in financial bubbles, there is typically a period where prices decline as competition intensifies, ultimately leading to consolidation in the market. Over time, only a few large companies remain dominant, while growth shifts to secondary innovations that build on the original technology. The AI era is unique in that the dominant companies, which lead in AI, were also at the forefront of the previous tech wave — particularly in software and cloud services.

Their scale and profitability have positioned them well to absorb the high costs of AI investments. However, Oppenheimer notes that new competitors are emerging. The number of AI patents skyrocketed to over 60,000 in 2022, up from around 8,000 just four years earlier, suggesting that AI is following the typical pattern of large-scale capital growth and competition. Oppenheimer also points out that the companies pioneering a new technology are not always the ones that will create the most value from it in the long run. For instance, during the internet boom, telecom companies received significant investment, yet it was companies like those in social media and ride-sharing that capitalized on the internet infrastructure and achieved the greatest success. Similarly, as AI evolves, new companies could emerge as the next wave of tech superstars, reshaping industries beyond the current giants.

Let's now take a look at the list of 35 AI superstars that are on the major bank's radar. We compiled this list after consulting a report by the bank on the AI industry. These stocks are also popular among elite hedge funds and hedge fund sentiment is an important indicator that we pay a lot of attention to at Insider Monkey.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

A technician in a clean room working on a semiconductor device, illuminated by the machines.

ASML Holding N.V. (NASDAQ:ASML)

Number of Hedge Fund Holders: 81 

ASML Holding N.V. (NASDAQ:ASML) makes and sells advanced semiconductor equipment systems. The company focuses on making and selling lithography machines. These machines are essential for companies who want to manufacture smaller chips. The lithography machines use photolithography, a process in which a light source is used to expose circuit patterns from a photomask onto a semiconductor wafer. The latest technological advances in this segment allow chipmakers to continually increase the number of transistors on the same area of silicon, with lithography historically representing a meaningful portion of the cost of making cutting-edge chips that are faster and more efficient than previous models. Chipmakers require EUV lithography tools developed by ASML to continue past the 10-nanometer process node.

Berenberg analyst Tammy Qiu recently lowered the price target on ASML Holding N.V. (NASDAQ:ASML) stock to EUR 945 from EUR 1,100 and kept a Buy rating on the shares. Deutsche Bank analyst Robert Sanders also recently lowered the price target on ASML to EUR 950 from EUR 1,100 and kept a Buy rating on the shares.

Overall ASML ranks 17th on our list of the AI superstars according to Goldman Sachs. While we acknowledge the potential of ASML as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ASML but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.