StockDriftsASML Delivers a Beat as AI Capex Cycle Rolls On
On a Schwab Network segment published July 18, 2026, CIO Matt Dmytryshyn of Composition joined the hosts to unpack ASML Holdings' (ASML) latest earnings report. ASML beat expectations and raised guidance, yet the stock initially gave back some gains — a pattern Dmytryshyn attributes not to weak fundamentals but to elevated valuations and profit-taking across the semiconductor space.
His overarching take: ASML's quarter was strong, and the real story lies in the long-term supply agreements the company has locked in with customers. These agreements, which include minimum prices and minimum volumes, give investors multiyear visibility that past semiconductor cycles never offered.
The Core Thesis: Semi-Cap Equipment at a Crossroads
Dmytryshyn argues the semi-cap equipment space is fundamentally sound but richly priced. He notes that many companies in the sector trade around 50 times earnings — a steep multiple even by the industry's standards. ASML itself has averaged a 35x multiple over the last ten years, implying that current levels already price in a great deal of optimism.
"It's not a stock we'd be stepping into at this point in time," Dmytryshyn said, "but if we found it at a more attractive valuation, we sure would." This tension — strong fundamentals versus frothy multiples — is the central challenge facing investors in ASML (ASML) and the broader semiconductor ecosystem today.
The Evidence: Long-Term Agreements and AI Demand Visibility
Dmytryshyn points to several concrete signals supporting the bull case:
- Long-term supply agreements with minimum price and volume commitments give ASML a predictable revenue trajectory that past cycles lacked.
- **Chip makers are accelerating expansion plans, driven by AI demand. Dmytryshyn believes the AI investment cycle is in the "early middle innings" with a multiyear runway ahead.
- Memory cycle duration: While the Street debates whether the memory upcycle extends through 2027 or 2028, Dmytryshyn sees it clearly running through 2028 based on the supply agreements already in place.
- Pricing power: When asked about a report that ASML plans to raise prices, he interprets it as a sign of pricing power in a demand-supply imbalance, reinforced by customers willingly signing long-term minimum-price contracts.
- Onshoring tailwind: Greater supply chain diversification and US semiconductor manufacturing onshoring add a structural demand driver beyond the AI cycle.
The Risks: Valuations, Excess Supply, and China Uncertainty
Dmytryshyn flags several risks that investors should weigh:
- Valuation risk**: At roughly 50x earnings across the semi-cap equipment space, multiples leave little room for error. A momentum unwind is already underway as investors take profits.
- Excess supply by decade's end: As capacity comes online through massive investment, Dmytryshyn raises the question of whether we could see excess supply in the 2029–2030 timeframe, potentially shortening the cycle's tail.
- China chip manufacturing: The unresolved question of China's domestic chip production capacity and its impact on global supply-demand dynamics adds another layer of uncertainty.
For memory stocks specifically, Dmytryshyn says positioning is driven by technicals — his team would look for technical support before adding exposure, suggesting the sell-off in memory may not be over yet.
Where Dmytryshyn Is Positioning Now
Dmytryshyn describes a diversified approach across the semiconductor value chain:
- Hardware stocks: This is where Composition sees the most compelling opportunities today. Fundamentals are improving, valuations are more attractive, and sentiment had been strong until the recent pullback.
- Semi-cap equipment: They are holding existing positions but not adding at current valuations.
- Memory: The sector got "a little stretched" and is selling off in July. Dmytryshyn would wait for technical support to re-emerge before adding exposure, noting the semiconductor index bounced back from a 5% intraday loss to just 2% down — a potential early signal of stabilization.
For investors watching the space, Dmytryshyn flags that the key leading indicator to monitor is pricing and contract renewal trends — whether customers are signing more long-term agreements and whether minimum prices are holding up or coming down.
Frequently asked questions
What did Matt Dmytryshyn say about ASML's earnings?+
Dmytryshyn said ASML had a great quarter, beating earnings and raising guidance. He highlighted the long-term supply agreements with minimum prices and volumes as giving investors multiyear visibility into revenue.
Is ASML stock a buy at current levels according to the Schwab Network analyst?+
No. Dmytryshyn said ASML is not a stock he would step into at current levels, noting it trades above its 10-year average 35x multiple. He would add exposure only at a more attractive valuation.
What is the AI investment cycle outlook according to this episode?+
Dmytryshyn places the AI cycle in the 'early middle innings' with a multiyear runway. The memory upcycle should last through 2028 based on long-term supply agreements, though there is risk of excess supply by 2029–2030.
How did ASML's stock react to its earnings report?+
The stock fluctuated during the trading day — it initially gave back gains after the beat and guidance raise. Dmytryshyn attributed this to elevated valuations and investors taking profits across the semiconductor space.
What sectors within semiconductors does Dmytryshyn favor right now?+
He favors hardware stocks for the most compelling risk-reward. Semi-cap equipment positions are being held but not increased. Memory needs to show technical support before he would add exposure.
Does Dmytryshyn think ASML has pricing power?+
Yes. He sees ASML's ability to raise prices and secure long-term minimum-price agreements from customers as clear evidence of pricing power in a demand-driven market.
