UBS upgrades ASML, says chipmaker is headed towards ‘inflection point’
There’s a strong investment opportunity in ASML as the stock heads towards a major turning point in 2027, according to UBS. Analyst Francois-Xavier Bouvignies lifted his rating on the Netherlands-based chipmaker manufacturing equipment maker to buy from neutral, partly given his renewed optimism on ASML’s lithography business. The company is the only one in the world that makes extreme ultraviolet (EUV) lithography machines needed for the most advanced semiconductors. According to the analyst, lithography intensity — or the number of exposures needed per wafer — will begin to increase in 2027 due to the upcoming production of the TSMC A14 logic node, meaning demand should be strong. TSMC is ASML’s largest customer of its EUV machines. “Following a year of underperformance with the stock down c20%, we see the declining lithography intensity thesis and overhang from the Chinese market as well understood by the market,” Bouvignies wrote in a note to clients, adding that ASML is “looking through to an inflection point in 2027” when “lithointensity would resume.” ASML’s work on the A14 production ramp will also boost the adoption of its High NA technology, which Bouvignies said contributes to the stock’s long-term growth. ASML 1Y mountain ASML stock performance over the past year. Wall Street has grown more bullish on ASML’s continued demand strength as analysts’ consensus earnings per share revisions on the stock have climbed between 20% and 30% in the past year, Bouvignies pointed out. “Given ASML’s long product lead times and high level of integration into customers’ long-term roadmaps, the market is likely to look through a relatively well telegraphed weak 26E to 27E, when we see the return of ASML as a quality compounder delivering 20% EPS CAGR 26-30E,” he added. Shares of ASML are up 8.7% this year.
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