ASML has great earnings – and investors sell… MSFT implodes after strong earnings… are we priced for perfection?… where the next wave of growth comes from… why low valuations alone won’t save you
Yesterday and this morning brought an important signal for AI investors – and I write that as someone who owns the stocks behind that signal.
First, yesterday, Dutch chipmaker ASML Holding N.V. (ASML) reported impressive fourth-quarter results. Bookings came in at €13.2 billion – more than double analyst estimates of €6.32 billion. The company announced a €12 billion share buyback and guided 2026 revenue between €34 billion and €39 billion, above consensus.
Given these strong numbers, how much did the stock surge? 5%? 10%? Maybe 20%?
Try again.
ASML finished the day down more than 2%.
Record-breaking results – and yet the stock price fell.
And this morning brings more of the same…
Microsoft Corp. (MSFT) reported after yesterday’s close, beating estimates on both earnings and revenue. Cloud revenue topped $50 billion for the first time.
And yet, as I write on Thursday morning, the stock is cratering 11%.
This tells us something important about AI expectations today
To be clear, both ASML and Microsoft are extraordinary companies.
ASML holds a near-monopoly on extreme ultraviolet (EUV) lithography systems – the machines required to manufacture the world’s most advanced chips for AI applications.
Customers like Taiwan Semiconductor Manufacturing Co. (TSM) and Intel Corp. (INTC) depend on ASML to stay competitive. Without ASML’s EUV machines, these chipmakers simply cannot manufacture the most advanced semiconductors powering today’s AI revolution.
There is no alternative supplier. ASML has a monopoly on this critical technology.
And Microsoft’s Azure cloud business continues growing at 39%, demonstrating that AI demand remains robust.
Yesterday’s earnings report confirmed that ASML’s fundamentals remain robust. AI-driven semiconductor demand continues to accelerate. And memory chipmakers are expanding capacity to address component shortages expected through 2027.
So, overall, the long-term business cases are intact for both companies, and both stocks remain near all-time highs with strong bullish momentum (ASML more so than MSFT recently).
But when stocks have already priced in near-perfection, that’s a major headwind for future performance.
Howard Marks, co-chairman of Oaktree Capital Management, put it perfectly:
There’s no asset so good that it can’t be overpriced and become a bad investment, and very few assets are so bad they can’t be underpriced and be a good investment.
ASML trades at a forward P/E ratio around 45x – well above the semiconductor sector average. The stock had rallied nearly 30% year-to-date heading into earnings, embedding massive optimism into the share price.
In that context, even spectacular results can simply confirm what investors already believed – not push the stock higher.
In Microsoft’s case, investors are concerned about ballooning AI infrastructure spending ($37.5 billion in quarterly capex, up from $22.6 billion a year ago) and the revelation that 45% of the company’s massive contract backlog comes from OpenAI.
The warning signs extend beyond ASML and Microsoft – what to do
Valuations have run ahead of fundamentals for many high-flying AI stocks.
Our global macro expert Eric Fry has been tracking this tension for months. Here’s Eric on the broader AI infrastructure buildout:
The cost of creating competitive AI infrastructure is massive and rising, while the ultimate payoff is becoming less certain and immediate.
These dynamics do not directly threaten the companies themselves, but they do threaten their lofty valuations.
Eric’s warning applies broadly: In a market where expectations run sky-high, even stellar results may already be priced in.
So, what does this mean for investors?
First, let’s be clear about what it doesn’t mean – immediately sell all your richly valued AI stocks.
If you’re holding quality companies, they’re richly valued for a reason.
But when a stock delivers fantastic results and still pulls back – especially near all-time highs – it’s a reminder to stay disciplined… manage risk… and think carefully about position sizing and profit-taking in names where optimism is already extreme.
Sometimes the smartest move in a roaring bull market isn’t to turn bearish – it’s to rebalance toward opportunities where valuations are still working for you, not against you.
On that front, Eric recently published a “Sell This, Buy That“ research package outlining which high-flyers he’s trimming, and what he’s buying instead.
Here’s Eric:
I’ve compiled a list of three companies that I believe are “Buys.”
These are under-the-radar, early opportunities that can help you protect and multiply your money during make-or-break markets.
You can find the details of these companies – ticker symbols and all – in my special broadcast, free of charge.
We’ll keep tracking ASML, MSFT, and the broader valuation picture in the weeks ahead.
But for now, the market’s reaction here is noteworthy. Recognize what it’s telling us about expectations…and what happens if they’re not met.
So where does the next wave of AI-driven growth come from?
According to our technology expert Luke Lango, the answer is simpler than most investors realize…
Follow the government’s money.
For the past six months, Washington has been taking equity stakes in strategic companies and writing checks that move markets. We’ve seen it with MP Materials (MP), Intel (INTC), Lithium Americas (LAC) Trilogy Metals (TMQ), and USA Rare Earth (USAR).
This isn’t traditional free-market capitalism. It’s what Luke calls the “Technological Republic” – where the government actively directs capital toward companies critical for AI supremacy.
And the next wave is already visible: robotics.
Here’s Luke:
AI without robots is just ChatGPT. Control of supply chains, physical production, and the technologies that turn software intelligence into real-world power — that’s the actual endgame.
According to Politico, the Trump administration is actively discussing a stand-alone executive order to support the U.S. robotics industry in 2026.
Why the urgency?
Because every major Washington priority depends on robotics:
- Reshoring manufacturing (competing with China’s labor scale)
- Offsetting labor shortages without wage inflation
- Defense logistics and infrastructure security
- Turning America’s AI lead into physical output
One stock to consider today
Luke has identified several companies positioned to potentially benefit, but one just made headlines this week – Richtech Robotics Inc. (RR).
On Monday, Richtech announced a strategic collaboration with Microsoft Corp. (MSFT) through Microsoft’s AI Co-Innovation Labs. The partnership integrates advanced AI capabilities into Richtech’s ADAM robot, enhancing its ability to perceive, reason, and interact in physical environments.
The stock surged over 44% on the news.
But circling back to ASML and MSFT, here’s what matters beyond the immediate pop…
This deal illustrates the kind of massive new revenue opportunity that justifies – and can provide breathing room for – high valuations driven by AI excitement.
If Richtech can secure more partners like Microsoft – potentially backed by government support through the Genesis Mission – we’re talking about transformational revenue growth.
That’s not just maintaining current valuations. That’s creating room for substantially higher prices.
This is the difference between hoping great earnings prop up stretched multiples…versus riding genuine top-line expansion that makes today’s valuations look attractive in hindsight.
Returning to Luke, for his full analysis of the robotics opportunity – including his complete breakdown of all the opportunities related to the Genesis Mission – click here to access his entire research package.
The flip side – when fundamentals crack, low valuations won’t save you
ASML and MSFT showed us what happens when great earnings meet stretched valuations and lofty expectations. But a different story from earlier this week delivered the opposite lesson…
Even discount valuations won’t save you from disappointing performance.
On Tuesday, UnitedHealth Group (UNH) – one of America’s largest healthcare companies – crashed nearly 20%, wiping out over $50 billion in market value in a single session.
The catalyst?
The company projected its first annual revenue decline in over three decades, forecasting $439 billion for 2026 versus $448 billion in 2025.
To be clear, UnitedHealth isn’t some speculative growth stock. This is a Dow Jones veteran that’s been a reliable compounder for decades.
Yet when management signaled deteriorating fundamentals – shedding unprofitable Medicare Advantage members, selling medical clinics, and facing government reimbursement pressure – the market showed no mercy.
The selloff dragged down the entire healthcare sector. On Tuesday, Humana (HUM) fell 21%, CVS Health (CVS) dropped 14%, and Elevance Health (ELV) slid 14%.
Today’s market is growing increasingly demanding
You can’t hide behind cheap valuations if the business is deteriorating…and it’s increasingly difficult to ride expensive valuations if growth/operational expectations are to the moon.
The sweet spot?
Companies with solid fundamentals trading at reasonable multiples – or better yet, companies positioned to deliver the kind of transformational revenue growth that justifies premium prices.
That’s what Eric’s “Sell This, Buy That” package addresses – identifying which overvalued names to trim and which reasonably-valued opportunities to buy instead.
And it’s why Luke’s Genesis Mission thesis matters – government-backed revenue growth can transform valuation pictures overnight.
Have a good evening,
Jeff Remsburg
