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Following this weekend's news of a framework for a trade deal with China, the growth trade ripped higher led by the semiconductors at new all-time highs. One very interesting and nuanced area of the semiconductor production process I want to focus on today is computational lithography. Think of it in terms of this analogy: I named my company Inside Edge Capital Management as a reference to my college days as a Division One ski racer. In ski racing hundredths of a second define champions, or placing just off the podium. We used precision machines to create sharp and precise edges on our skis to carve up icy race courses. Lithography is the semiconductor industry's equivalent to cutting fine and precise lines into a semiconductor wafer. A wafer is a circular slice of silicon that serves as the foundation on which semiconductor devices and integrated circuits are built. There is one company that essentially holds a monopoly on lithography and is essential in the production of the world's most advanced chips - ASML . ASML is arguably one of the most important companies in the advanced semiconductor buildout while not directly an AI-chip designer. They provide lithography machines critical for manufacturing advanced 5 and 3 nanometer nodes. Basically they enable the GPU makers to develop advanced-level GPU's, AI accelerators, and cutting-edge CPU's. Without ASML, chipmakers like TSMC , Samsung , Intel , and Micron couldn't produce advanced semiconductors at all. If you want more information on this process - check their YouTube channel . Just Monday we added ASML to our speed-boat portfolio "Active Opps" for a breakout to new all-time highs. Looking at the weekly chart, ASML is consolidating below all-time highs of $1,100. Leading up to this approach of all-time highs, you'll notice several large volume accumulation weeks suggesting institutional accumulation ahead of a possible break to new highs. The weekly moving averages have all lined up with the 20 period above the 50 period, and the 50 period above the 200 period. Bullish. The upward target should coincide with that rising parallel channel. Looking at the expected 2026 EPS of $30.21 the valuation is not all that stretched at a 36X multiple for a company so central to semiconductor production. 2025 annual EPS growth was 45% compared to 2024. I'm wondering if analysts are going to revise 2026 expectations higher in coming quarters? Moving to the daily chart we added a 3.5% position in ASML ahead of this possible test of all-time highs following a breakout from a consolidation triangle. I want to see volume pick up here above the 50-day average of 1.57m shares, something in the order of 2M or more to help confirm the breakout that could carry us through all-time highs. With one more day of follow through I will alert our investors and subscribers that we're adding to the position to reach a 5%+ allocation for a break through all-time highs. In prior years ASML was in the bull market penalty box for a while due to their ties with China, but that has since been worked out. Being a Dutch-based company, the U.S. and Dutch governments have restricted ASML from selling their lithography systems to China as they are used in Chinese defense systems. From a geopolitical point of view, they are kind of an AI lever between China and the U.S. Being that the company reports results in Euros while doing business in the U.S., Asia, and elsewhere, if the EUR weakens vs USD, then USD-denonminated sales converted into EUR will increase in Euro-terms, benefiting reported earnings. I think the USD weakness has played out as the Fed rate cuts have mostly been priced in. If the USD does continue to rally, then the Euro should weaken helping ASML earnings in the next 1 or 2 reporting periods. -Todd Gordon, Founder of Inside Edge Capital, LLC We offer active stock alerts , portfolio management, as well as regular market updates like the idea presented above. DISCLOSURES: Gordon owns ASML personally and in his wealth management company Inside Edge Capital. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
