Amazon and ASML: Strong Tech Stocks for Long-Term Growth

Identifying reasonably priced growth technology stocks in today’s market can be challenging. Despite fluctuations in 2020, 2022, and 2025, technology stocks have generally surged since the Great Recession of 2008-09, yielding substantial returns for investors. Presently, many of these stocks trade at high valuations.

However, not all stocks are overvalued. Two major technology companies—Amazon (NASDAQ: AMZN) and ASML (NASDAQ: ASML)—appear reasonably priced and are positioned for significant growth over the next decade, largely due to advancements in artificial intelligence (AI).

Amazon’s Cloud Demand Sustains Growth

While many recognize Amazon for its e-commerce platform, the bulk of its profits stem from cloud computing. In the first quarter, Amazon Web Services (AWS) achieved an impressive annualized revenue of $117 billion, marking a 17% year-over-year increase, with an operating margin reaching 40%. This margin could translate to approximately $46 billion to $47 billion in operating income for AWS over a 12-month period.

Management notes that AWS currently faces capacity limitations as it seeks to expand data centers for AI clients such as Anthropic. This constraint bodes well for long-term growth, particularly as the demand for cloud computing rises alongside AI advancements. Maintaining its strong profit margin may allow AWS to generate $100 billion in operating income within the next five to ten years.

In addition, Amazon’s North American retail division reported an 8% increase in net sales (adjusted for foreign currency fluctuations), alongside rising profit margins. Although the company may encounter challenges from tariffs, it has the resources to navigate supply chain disruptions effectively. Advertising revenue for product listings grew by 18% year over year, totaling $13.9 billion in the quarter, indicating high profitability.

Currently, Amazon’s price-to-earnings (P/E) ratio is 34, which might appear steep for value seekers. Yet, it’s important to recognize that Amazon’s profits are poised for rapid growth, which would likely reduce this P/E ratio over time. Historically, Amazon’s average P/E ratio in the last decade is closer to 55, suggesting that now could be an advantageous time to invest in Amazon.

ASML’s Strong Position in Semiconductors

ASML leads the market in producing advanced lithography equipment vital for semiconductor manufacturers. Competing companies have struggled to recreate ASML’s cutting-edge systems, particularly in regions like China. Without these advanced machines, producing the latest computer chips—such as those from Nvidia, which are integral to the AI revolution—becomes impossible.

While ASML’s growth is steady rather than rapid, it enjoys a robust outlook as global spending on semiconductor manufacturing increases, especially with commitments like the $165 billion by Taiwan Semiconductor Manufacturing for U.S. facilities. A portion of this investment will likely go towards ASML’s high-value lithography machines.

Though ASML reported a decline in revenue last quarter, it has experienced a 351% growth in trailing-12-month revenue over the past decade. By 2030, ASML projects revenue between €44 billion and €60 billion (approximately $50 billion to $68 billion at current exchange rates), up from $33 billion last year.

Similar to Amazon, ASML’s current P/E ratio of 29 does not signify a bargain, but it is lower than its ten-year average. The company is well-positioned to benefit from the rising demand for AI data centers, suggesting continued growth in earnings over the next several years.

Investing Amid Opportunities

Those who worry they missed investing in successful stocks should note that opportunities often resurface. Analysts occasionally recommend a “Double Down” strategy for stocks poised for a breakout. The past returns for companies like Nvidia and Apple highlight the potential value of timely investments.

• Nvidia: An investment of $1,000 made in 2009 would now be worth $296,928!
• Apple: A $1,000 investment in 2008 would have grown to $38,933!
• Netflix: If you invested $1,000 in 2004, it would now be worth $623,685!

Currently, analysts are issuing “Double Down” alerts for three notable companies that investors may find attractive.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Brett Schafer has positions in Amazon, and The Motley Fool has interests in and recommends ASML, Amazon, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

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