Market Shakes: ASML and Microsoft Amid AI-Driven Sell-Off

On Monday, Wall Street reacted sharply to DeepSeek’s AI announcement, resulting in a loss of $1 trillion in U.S. tech stocks. Well-known companies like ASML (NASDAQ: ASML) and Microsoft (NASDAQ: MSFT) were swept up in the panic, despite their strong business foundations.

These industry leaders, known for their reliable dividend income and diversified revenue, saw a significant drop in share prices due to the market’s inability to separate emerging AI firms from established tech giants. This disconnection presents a valuable opportunity for investors focused on dividends.

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ASML: The Sole Supplier for Semiconductor Innovation

ASML’s shares fell 7.1% on Monday. Despite this decrease, the company remains the only manufacturer of extreme ultraviolet (EUV) lithography machines, essential for making advanced semiconductors. ASML’s unique market position shields it from short-term shifts in AI-focused chip demand.

The complexity of semiconductor manufacturing only bolsters ASML’s standing, as innovative chip designs require its EUV technology. This competitive advantage, combined with long-term service agreements and high switching costs, secures consistent cash flow and positions ASML as a strong choice for dividend growth.

With a 0.92% yield and a robust 27.2% growth rate for dividends over three years, ASML presents an appealing option for dividend investors. The company’s current trading at 29.6x forward earnings, slightly above the S&P 500’s 24.3x, is seen as an opportune moment to invest in this critical tech player.

Microsoft: Resilient through Diverse Revenue Streams

Microsoft’s stock dipped 2.49% on the same day, offering a strong entry point into one of the tech sector’s leading dividend growth stories. While much of the market is concerned about AI chip demand, Microsoft continues to excel in various profitable areas including Windows, Office, Azure cloud services, and gaming, each bolstered by powerful network effects.

The company yields 0.75%, which may seem modest; however, its low 24.7% payout ratio alongside a 10.2% growth rate for dividends suggests plenty of potential for future increases. Microsoft’s diverse revenue, solid financial position, and strategic investments in AI through OpenAI indicate sustained growth ahead.

Despite its 33.6x forward price-to-earnings (P/E) ratio being higher than the S&P 500, Microsoft’s significant competitive advantages and promising dividend growth potential justify this valuation. Under CEO Satya Nadella, Microsoft has diversified further, especially through Azure’s dominance in cloud computing and its gaming division’s growth, which boost recurring revenue and support ongoing dividend increases.

Seize the Moment: Value in Dividend Stocks Amid Decline

The market’s recent concerns surrounding AI have created a rare opportunity to acquire high-quality dividend growth stocks at great prices. Both ASML and Microsoft stand out for their competitive strengths, reliable payout ratios, and strong histories of distributing dividends.

Their recent price declines seem more related to market sentiments rather than any real dip in their business health. For investors focused on long-term dividends, this disconnect between stock price and value is an excellent moment to consider adding both companies to their portfolios.

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George Budwell has positions in Microsoft. The Motley Fool has positions in and recommends ASML and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. 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.