TLDR
- ASML stock jumped 6.6% on Monday after Arete Research upgraded it to buy for the first time in seven years
- J.P. Morgan says ASML’s worst quarter is behind it and maintains top pick status
- Taiwan Semiconductor expected to spend $50 billion in both 2026 and 2027, up from $38-42 billion this year
- Strong AI spending from Nvidia, Broadcom and hyperscale customers continues to drive demand
- ASML trades below historical multiples despite monopoly on EUV lithography technology needed for AI chips
ASML shares rallied hard on Monday, climbing 6.6% as Wall Street analysts turned more bullish on the Dutch chipmaker. The stock had been lagging other semiconductor equipment names this year but found new life thanks to fresh analyst support.
Arete Research upgraded ASML from hold to buy on Friday. This marks the first time in seven years the boutique research firm has had a buy rating on the stock. They slapped an 879 euro price target on shares.
The upgrade came as recent AI spending data painted a rosier picture for chip equipment demand. ASML had spooked investors earlier this summer when management couldn’t guarantee 2026 would be a growth year.
Those concerns now appear overblown. J.P. Morgan says ASML’s worst quarter is likely behind it and keeps the stock as a top pick.
Customer Spending Ramp Expected
The bullish calls center on one key customer. Taiwan Semiconductor Manufacturing is expected to boost capital spending to $50 billion in both 2026 and 2027.
That’s a big jump from this year’s $38-42 billion range that TSMC management recently outlined. The spending increase should directly benefit ASML given its close relationship with the foundry giant.
TSMC has already shown strong momentum. The company reported 37% year-over-year revenue growth through August 2025. Analysts expect this trend to continue through the rest of the year.
The foundry’s ramp-up of its 2-nanometer process is driving demand. Nvidia’s expected adoption of TSMC’s A16 process should increase EUV exposure requirements.
This creates a direct path for stronger ASML orders in 2026 and particularly in 2027. The timing aligns with when TSMC’s higher spending kicks in.
Memory Market Provides Additional Tailwind
Beyond logic chips, the memory market offers another growth avenue. High-bandwidth memory demand continues to surge thanks to AI applications.
DRAM pricing has stayed strong supported by ongoing AI-related demand. The tight supply-demand environment is expected to continue until new capacity comes online in 2027.
Samsung could provide another catalyst. If the Korean giant qualifies its HBM4 memory with Nvidia, it would trigger stronger Samsung capital spending.
J.P. Morgan notes that Samsung qualification would be a major catalyst for ASML. It would prompt orders that impact shipments by the end of2026 and carry into 2027.
ASML holds a monopoly position in extreme ultraviolet lithography technology. This equipment is essential for making the leading-edge chips that power AI systems.
The company’s lithography market share is expected to exceed 80-89%. Higher EUV average selling prices are driving this expansion.
ASML’s valuation had fallen to the cheapest level in 10 years earlier this summer. The stock trades below its historical 30-35 times earnings multiple despite its dominant market position.
J.P. Morgan maintains a December 2026 price target of 822 euros. This is based on 32 times 2027 earnings estimates with a 9% discount rate.
The shift to High-NA EUV starting in 2026 should increase lithography intensity. This supports greater EUV adoption in DRAM manufacturing.
Uncertainty around tariffs had weighed on the stock. However, no tariffs were imposed on semiconductor equipment shipments into the U.S.
ASML is expected to begin receiving orders for its planned U.S. capacity. AI-related spending from Nvidia, Broadcom and hyperscale customers remains robust.
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