Where Will ASML Stock Be in 1 Year?
News Summary
ASML, a critical player in the global semiconductor supply chain, has seen its stock rise 49% over the past year, with most gains occurring in the last three months after struggling due to a China sales ban, trade wars, and a slower-than-expected recovery in some semiconductor niches. The company's recent impressive momentum is attributed to an improving 2026 outlook and a surge in Q3 net bookings to 5.4 billion euros, with two-thirds from its Extreme Ultraviolet (EUV) lithography systems. This surge is driven by strong demand for advanced chips (3nm to 5nm process nodes) that power AI applications in data centers and smartphones, for which ASML's EUV systems are essential. TSMC, a major customer, derived 60% of its Q3 revenue from 3nm and 5nm chips and plans to allocate 70% of its $41 billion 2025 capital spending to advanced process nodes. Furthermore, Gartner forecasts a 51% increase in generative AI smartphone shipments next year, and Citigroup expects AI infrastructure capital spending by big tech companies to reach $490 billion in 2026, providing significant tailwinds for ASML. While analysts' median 12-month price target for ASML is $1,140 (a potential 7% upside), and 2026 earnings growth is projected at 5% (down from 28% in 2025), 17 analysts have recently raised their 2026 earnings expectations. The improving order inflow and robust spending on AI chips suggest ASML could exceed current analyst expectations, positioning the stock for further upside in the coming year.
Background
ASML is the world's sole manufacturer of Extreme Ultraviolet (EUV) lithography machines, critical for producing advanced chips at 7 nanometers and below. These chips are essential for cutting-edge technologies like artificial intelligence, high-performance computing, and smartphones. The company operates within a complex global geopolitical landscape, particularly concerning U.S.-led export control policies targeting China. In 2024 (one year prior to the article's 2025 setting), ASML faced headwinds from the U.S. ban on selling certain advanced machines to China, compounded by tariff-fueled trade tensions and a slower-than-expected recovery in some semiconductor niches. This led to underperformance in its stock and initially cautious guidance for 2025 and 2026, including a lowered 2025 revenue outlook and uncertainty about 2026 growth. These macroeconomic and geopolitical concerns, particularly tariff-related issues, were key drivers of its initial prudence. However, the ongoing AI boom is now driving a structural shift in market demand.
In-Depth AI Insights
To what extent can ASML's "AI-driven" recovery offset geopolitical risks under the Trump administration? - While the article highlights AI demand as ASML's current growth driver, with Donald Trump re-elected US President in 2024, the long-term persistence and potential escalation of US-China tech competition and export control policies remain significant risks. ASML's recovery might be more a function of strong non-Chinese market demand rather than a fundamental easing of geopolitical tensions. - In the long run, if the U.S. further broadens its tech restrictions on China (e.g., extending beyond EUV to DUV systems) or pressures allies for stricter measures, ASML's vulnerability in the global supply chain could resurface. Investors must remain vigilant about policy risks, not solely focus on technological demand. Are analyst earnings expectations for ASML underestimating the true scale and pace of AI investment? - The article notes that Citigroup has raised its 2026 AI infrastructure capital spending forecast, and TSMC is allocating a significant portion of its capex to advanced process nodes. This suggests the market may not have fully priced in the true scale and urgency of the AI "arms race." ASML, as the sole supplier of critical equipment for this race, could see continued outperformance in order growth. - However, the sustainability of this outperformance depends on the speed at which AI applications translate into tangible profits and the stability of the broader macroeconomy. If the return on AI investment lengthens or a global economic downturn occurs, it could impact the pace of capital expenditure, affecting ASML's long-term order visibility. What are the implications of ASML's monopoly in EUV for its long-term strategic value in the current market environment? - ASML's exclusive position in EUV grants it significant pricing power and market dominance, allowing it to disproportionately benefit from AI-driven advanced chip demand. This establishes a formidable competitive barrier, especially in an increasingly intense technological race. - However, this monopoly also makes it a focal point for geopolitical maneuvering. Governments, particularly the U.S., may leverage its equipment as a strategic tool, potentially leading to ongoing regulatory or sales restrictions for ASML in specific markets. The company's long-term strategy must balance commercial interests with geopolitical pressures, with its true value lying in its ability to maintain and expand technological leadership and market share despite these constraints.