ASML Just Announced Fantastic News for Investors in AI Stocks

Artificial intelligence (AI) stocks have been almost a no-brainer choice for investors in recent years. The technology has the potential to revamp how many things are done, helping companies increase efficiency and lower costs. Companies developing and applying AI have already reaped some of the rewards -- and that's translated into gains for shareholders.

But this year, investors have started to worry about one particular thing, and that's the possibility of an eventual slowdown in demand. The concern is that such a slowdown might mean tech companies are overspending in the AI infrastructure build-out today. This has weighed on the performance of AI stocks at times, resulting in a bumpy ride for investors who had gotten used to a smooth ride higher in the earlier stages of the AI boom.

Against such a backdrop, it's important to listen to key industry players, as they may offer valuable clues about what's next. ASML Holding (NASDAQ:ASML), a tech giant with a central role in the story, is one of the latest to offer such clues -- in fact, the company announced fantastic news for investors in AI stocks.

ASML's unique position

So, first, a quick note on ASML's position in the AI space. The company is the only one in the world to make extreme ultraviolet lithography (EUV) machines, an essential tool in the manufacturing of advanced semiconductors. They are critical to the production of the chips powering the AI revolution, such as Nvidia's top-performing graphics processing units (GPUs).

This offers ASML an incredibly solid moat, or competitive advantage, as it would take a potential rival years of research and development and billions of dollars in investment to get in on the business. And this position also offers ASML a steady picture of what's happening in the AI market. ASML serves major players such as manufacturing leader Taiwan Semiconductor Manufacturing, chipmaker Intel, and memory giant Micron Technology.

TSMC, for example, communicates with chip designers and the cloud service providers that offer these products to customers. So TSMC has a broad view of demand and brings this to ASML.

Visibility into chip demand

Now, let's consider the fantastic news that ASML recently delivered to investors. The company, as it reported earnings last week, said some of its customers are interested in placing orders as far out as 2030. And this is based on their visibility into chip demand.

As mentioned, investors have worried about the size of tech companies' investments in AI infrastructure. Amazon, Alphabet, Microsoft, and Meta Platforms have pledged to spend more than $700 billion this year alone on the effort. Though investors have expressed concern about this massive investment, companies have said that demand justifies it.

And today, ASML's order book reinforces this message. ASML even said that its planned supply right now won't fulfill the demand it's seeing for 2027 and 2028.

AI applied to the real world

What does all of this mean for you as an investor? No one has a crystal ball that will allow us to see exactly how the AI story will unfold over time. But a couple of points offer us reason to be optimistic about demand and the long-term story. AI chips are needed to power the use of AI, meaning they will be essential as AI is put to work across real-world problems. This phase is just beginning, as companies and individuals turn more frequently to AI and apply it to their needs.

Also, cloud service providers are seeing real demand for chips to run workloads. So they aren't building for potential needs but for needs that actually exist.

Of course, it's possible that a slowdown in demand could interrupt this story. In such a case, it might extend AI innovators' timelines to monetize their investments. But such a possibility may be temporary -- it's clear that companies are eager to benefit from all that AI offers, and this supports the idea of AI strength over time.

Investors shouldn't go all in on AI stocks or any other single area -- betting the farm on one stock or industry is too risky. But as part of a diversified portfolio, AI stocks could continue to be a winning bet for investors over the long run.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends ASML, Alphabet, Amazon, Intel, Meta Platforms, Micron Technology, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.