Key Points

  • The memory chip shortage is one of the biggest bottlenecks for artificial intelligence (AI).

  • SK Hynix plays a major role in the memory chip market.

  • Memory stocks have room to run, but ASML is the better buy for folks with a long-term investing time horizon.

  • 10 stocks we like better than ASML ›

As of market close on July 9, the seven best-performing S&P 500 (SNPINDEX: ^GSPC) stocks year to date are Sandisk, Dell Technologies, Micron Technology, Western Digital, Seagate Technology Holdings, Intel, and Marvell Technology. All of these companies are directly involved with or benefiting from the boom in memory chips for artificial intelligence (AI) workloads in data centers and consumer electronics.

Demand for memory chips and energy are the two greatest bottlenecks impacting the AI industry right now. High bandwidth memory (HBM) and dynamic random-access memory (DRAM) chips function as a working memory for handling massive AI training and inference data sets. And AI NAND (flash) supports longer-term, large-scale data storage and use.

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SK Hynix (NASDAQ: SKHY) (NASDAQ: SKHYV) is a full-stack AI memory provider. It is expanding its HBM capabilities to improve AI chip performance. Demand for SK Hynix memory chips is far outpacing supply, creating a multi-year runway for future growth that has propelled the company to a $1 trillion valuation.

On Friday, July 10, SK Hynix listed on the Nasdaq after launching a U.S. share sale. SK Hynix is up 241.5% year to date as of market close on July 9. If it were in the S&P 500, it would be the fourth-best-performing stock, ahead of Western Digital and right behind its competitor Micron.

SK Hynix will never join the S&P 500 because it's a South Korean company, just as Taiwan Semiconductor Manufacturing isn't in the S&P 500. However, it will likely be fast-tracked into the Nasdaq-100 over the coming weeks, similar to how Space Exploration Technologies (NASDAQ: SPCX) went public on June 12 and was added to the Nasdaq-100 on July 7. The Nasdaq-100 is the 100 largest non-financial companies by market cap listed on the Nasdaq exchange.

SK Hynix is chock-full of potential. But ASML (NASDAQ: ASML) is an even better Nasdaq-100 stock for investors looking for a fundamental AI stock to buy and hold for at least five years.

ASML is in a league of its own

Netherlands-based ASML is the most valuable company in Europe. And although it's not in the S&P 500 because it isn't based in the U.S., it is one of the top 15 largest holdings in the Nasdaq-100.

ASML doesn't design or manufacture chips. Rather, it produces highly advanced machines needed to perform the lithography step in the semiconductor manufacturing process. Lithography is arguably the most complex and important step in the chip production process because it involves printing designs onto silicon.

ASML has a virtual monopoly on extreme ultraviolet (EUV) machines that use reflective lenses to bounce light in a vacuum, rather than refracting it. The EUV technology produces an incredibly short 13.5-nanometer (nm) wavelength, compared to around 193 nm for deep ultraviolet (DUV) machines.

ASML's high-numerical-aperture (High-NA) EUV machines have an even higher resolution for producing next-generation AI chips at scale. Shorter wavelengths enable chip manufacturers to print smaller, denser features on critical microchip layers in a single pass. To achieve that same level of precision, DUV machines use a process called multi-patterning, which involves several steps and takes longer. So even though EUV machines are incredibly expensive, they can be higher-performance and more cost-effective over a longer useful life.

You can think of DUV machines like manually hitting a nail with a hammer, and EUV machines as having a nail gun. If you're hanging a painting up, a hammer is just fine. But if you're building a house, you'd want the nail gun. EUV machines are overpowered for general chip manufacturing that doesn't require small transistors and wires. But they play an integral role in AI chip manufacturing. There are multiple companies besides ASML that make DUV machines. But ASML is the one that cracked the code on EUV machines, giving chip designers the nail gun needed to evolve manufacturing from nomadic bands to a booming civilization.

As AI adoption grows, fabs that are taking AI chip orders will need to upgrade their equipment to ASML's more advanced EUV machines. And newer fabs will likely incorporate EUV machines as standard equipment. Just last month, Elon Musk addressed ASML employees during a conversation with ASML CEO Christophe Fouquet about the proposed Terafab joint venture between Tesla (NASDAQ: TSLA), SpaceX, and SpaceX-owned xAI.

Terafab would be the largest chip manufacturing facility -- tasked with producing AI chips for SpaceX's orbital data centers. Since Terafab would be handling AI chip workloads, it would need ASML's most advanced machines. And given ASML's multi-year backlog, Musk was essentially giving ASML the green light to accelerate production, since big orders could be coming down the road.

All roads lead to ASML

Semiconductor equipment manufacturers like Applied Materials (NASDAQ: AMAT) and Lam Research (NASDAQ: LRCX) compete in other aspects of chip-making, such as deposition and etching. But no company comes close to challenging ASML in EUV lithography.

Best of all, ASML's lithography machines are needed to produce all kinds of AI chips, including logic chips such as graphics processing units (GPUs), central processing units, and custom-built AI chips like Alphabet's Tensor Processing Units and HBM, DRAM, and NAND memory chips like those made by SK Hynix.

Each quarter, ASML breaks down net system sales (equipment orders excluding servicing its installed base) by logic and memory. In the first quarter of 2026, memory jumped to 51% compared to 42% in the first quarter of 2025, while logic declined from 58% to 49%. The beauty of ASML's business model is that it wins as long as AI chip demand is growing. It is relatively indifferent whether custom AI chips, like those made by Alphabet, eat into GPU market share. Or if Intel takes market share from Taiwan Semiconductor, SK Hynix gains an edge over Micron, etc. ASML has already benefited from the insatiable demand for AI compute, and it is now also benefiting from the boom in memory chip demand.

In sum, buying SK Hynix is a pure-play bet on memory chip demand continuing to outpace supply and on SK Hynix holding its own against fierce competition. Buying ASML is a catch-all way to bet on increased AI chip innovation and the need for higher production, and in turn, more ASML machines in chip fabs.

ASML is worth the premium price

ASML's position in the AI supply chain is well known. The stock is up 125% over the last year and trades at a premium valuation, with a forward price-to-earnings ratio of 49.5, compared with 49.2 for Applied Materials and 43.5 for Lam Research.

ASML may need its earnings growth to catch up to its valuation to justify a higher run-up. But for investors with a long-term time horizon, it stands out as arguably the best semiconductor stock to buy and hold because next-generation AI logic and memory chips depend on ASML's systems to bring their designs to life.

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Daniel Foelber has positions in ASML. The Motley Fool has positions in and recommends ASML, Alphabet, Applied Materials, Intel, Lam Research, Marvell Technology, Micron Technology, Taiwan Semiconductor Manufacturing, Tesla, and Western Digital. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.