The share price of Dutch lithography giant ASML Holding NV (ASML.US), often hailed as a pinnacle of human technology, has been reaching consecutive record highs in both its European listing and its US ADR. The US ADR has surged nearly 10% this week, significantly outperforming the Philadelphia Semiconductor Index, which has been on a downward trend.
This rally to new peaks has largely overshadowed the company's historically lower valuation compared to semiconductor equipment peers like Applied Materials and Lam Research. The climb of ASML Holding NV shares to fresh record levels stands out as one of the few bright spots in the European market this year. If this upward momentum continues, it could rectify the stock's position as one of the most undervalued in its sector for many years.
Despite a substantial 64% gain in 2026, the stock's year-to-date performance still lags behind the broader US semiconductor segment. That segment has been propelled by surging demand for AI compute infrastructure, driven by the explosive growth of AI application tools and agents. Its gains also trail behind equipment peers like Applied Materials and key customers such as SK Hynix and Samsung Electronics. This suggests the market has previously assigned more AI-related premium to GPU makers, DRAM/NAND/HBM producers, optical interconnect systems, liquid cooling solutions, advanced packaging, and US/Asian semiconductor stocks, while undervaluing ASML's critical role as the sole supplier of EUV lithography—the "capacity gatekeeper."
While ASML still benefits indirectly from soaring memory chip prices and the relentless surge in AI chip demand, investors have questioned the company's reluctance to raise prices, the adoption pace of its next-generation High-NA EUV lithography systems, and how quickly it can ramp up supply. The stock's forward price-to-earnings ratio relative to its major peers is at its lowest level in over a decade.
As shown in the chart above, ASML is trading at its cheapest valuation relative to peers like Applied Materials and Tokyo Electron in ten years, based on the forward P/E multiples of a basket of four stocks. ASML, Europe's most valuable listed company, holds a near-monopoly in the market for systems that print the microscopic circuits of the world's most advanced chips. Its most advanced EUV lithography tools are essential for producing the logic chips indispensable to AI data centers and the accompanying DRAM/HBM memory chips.
Bernstein analyst David Dai noted in a media interview that the market harbors "a lot of concerns that it cannot fully monetize this demand even if future market demand proves to be very strong." He stated that, for now, hedge fund investors frequently short ASML to fund purchases of other hot AI semiconductor stocks like SK Hynix, Samsung Electronics, and Nvidia.
However, Wall Street's overall sentiment toward ASML remains bullish. JPMorgan recently raised its price target for ASML from €1,515 to €1,900, while Morgan Stanley increased its target from €1,400 to €1,660, both maintaining Overweight ratings. The JPMorgan analyst team highlighted that ASML can deliver over 110 low-NA EUV exposure systems without building new factories, far exceeding the market's previous consensus ceiling of around 90 units and significantly surpassing the company's own recent output guidance.
The market's perception of ASML is shifting from an "undervalued European equipment stock in the AI semiconductor bull market" to a "bottleneck platform asset that must be repriced within the AI compute capital expenditure cycle."
Record Highs Amidst Valuation Discounts
As the world's sole supplier of extreme ultraviolet (EUV) lithography machines, ASML appears to be a classic "picks and shovels" investment play in the AI boom. EUV lithography is used to print the incredibly complex patterns required for advanced semiconductor chips. However, despite soaring demand pushing chip prices higher, ASML CEO Christophe Fouquet stated in April that the company would not raise equipment prices simply due to strong demand—these machines can cost around €350 million ($405 million) each. Barclays analysts also believe a price hike is currently unlikely.
Another potential setback is the delayed adoption of ASML's most advanced High-NA lithography equipment. TSMC has indicated it will postpone using these tools for chip production until at least 2029. Ken Hui, a director at Bakewell Alpha Fund, noted there's no guarantee of immediate adoption post-2029. He suggested that as the Taiwan-based chipmaking giant improves the production efficiency of its existing tools, it might not need High-NA equipment even for the A10 chips expected around 2030.
Ultimately, investors worry that ASML's share of semiconductor manufacturers' overall budgets is shrinking, as the global advanced semiconductor manufacturing industry increasingly focuses on processes beyond lithography—such as deposition, high-aspect-ratio etching, and 2.5D/3D advanced packaging.
As shown in the chart above, ASML's stock returns this year have significantly lagged behind most of its peers and customers. There are also external doubts about ASML's ability to ramp up capacity quickly enough to capture growth opportunities. However, these concerns have recently eased after several Wall Street analysts indicated ASML is increasing production faster than previously expected.
Bank of America earlier this month raised its 12-month price target for ASML to the highest among all brokerages, projecting its EUV lithography equipment output will reach 90 units annually by the end of 2027. In comparison, the company sold 48 units last year. ASML's valuation relative to Lam Research, which focuses on etching and has much lower growth expectations, has fallen to near parity—a situation not seen since 2012. A similar rare trend is observed when comparing ASML to Japan's Tokyo Electron.
This relatively low valuation may attract some long-term focused investors. John Lamb, an equity investment director at Capital Group, ASML's second-largest shareholder, stated, "The market should further recognize ASML in the future." Lamb noted that most of the hot momentum trades in recent months have been in US and Asian semiconductor giants, putting ASML at a "slight disadvantage." He added, "ASML likely needs to continue building its order book to some extent, and that just takes time."
AI-Driven Chip Demand Outstrips Capacity, Placing EUV at the Epicenter of Shortages
This week, ASML's stock outperformed the S&P 500 Semiconductor Index, the S&P 500, the Nasdaq 100, and the Philadelphia Semiconductor Index during a pullback in the AI compute supply chain. The core logic is that the market is shifting the AI investment theme from "revenue growth elasticity of chip design giants" further down the chain to "the physical semiconductor bottlenecks of advanced node capacity and advanced packaging machine demand expansion."
ASML CEO Christophe Fouquet recently stated in an interview that the booming global semiconductor market will face a prolonged period of supply shortage for the foreseeable future, predicting the market could reach a staggering $1.5 trillion by 2030. He noted that chip demand driven by frontier technologies like AI, satellite systems, and embodied robots is far outstripping the industry's production capacity. The global semiconductor market, currently around $800 billion as of 2025, could reach $1.5 trillion by 2030, with "AI demand coming so strong that the market will remain supply-constrained for quite some time."
This signifies that the core challenge for the global chip industry is shifting from past "demand cycle fluctuations" to "the pace of AI compute infrastructure-led capacity expansion exceeding the pace of semiconductor equipment, wafer fab, and advanced packaging & testing factory capacity expansion."
The robust demand from advanced node chipmakers like TSMC and Intel for ASML's EUV equipment, driven by seemingly insatiable demand for AI GPU/ASIC and HBM/DRAM memory chips, has helped the Dutch equipment maker become Europe's most valuable company. In the US, ASML's ADR (ASML.US) has surged 66% year-to-date, repeatedly hitting new all-time highs.
In the view of major investment firms like JPMorgan, UBS, Citi, and KeyBanc, a new "main upward wave" for ASML's stock has already begun. The common basis for JPMorgan and Morgan Stanley's target price hikes is the potential for ASML's low-NA EUV annual capacity to increase significantly from the previously assumed ~90 units without needing additional factory space. JPMorgan's core logic is that the market consensus for ASML's 2027-2028 outlook needs a comprehensive reassessment.
The bank raised its target from €1,515 to €1,900, maintaining Overweight, citing very optimistic signals from the company on EUV lithography system capacity expansion and implying strong customer demand. Simultaneously, immersion DUV lithography is seen as another growth driver, with JPMorgan's 2028 EPS forecast significantly above market expectations.
"AI-driven chip demand is so strong that we will be in a severely supply-constrained market for quite a long period," Fouquet said, pointing out that grand plans like Tesla and SpaceX CEO Elon Musk's epic chipmaking project—the "TeraFab" AI initiative and the Starlink satellite mega-constellation—could drive a new wave of even stronger demand. Musk's recent push for "Terafab"-level AI compute aims to end the chip shortage with a "human miracle of chipmaking."
Recent catalysts for advanced node AI chips, memory chip demand, and capacity expansion are uniformly positive for semiconductor equipment. As tech giants like Microsoft, Google, and Meta drive the global hyperscale AI data center construction frenzy, this is accelerating the expansion of 3nm-and-below advanced node AI chip production, CoWoS/3D advanced packaging capacity, and DRAM/NAND memory chip capacity at chipmakers. This solidifies the long-term bullish thesis for the semiconductor equipment sector.
Under the AI super-cycle, advanced node logic chips like AI GPU/ASIC, memory chips like HBM/DRAM/NAND, and some mature-node chips/power semiconductors closely tied to AI data center power chains, as well as high-performance chips for intra-cluster and DCI connections, will undoubtedly remain in a tight supply-demand balance long-term.
ASML will be one of the core beneficiaries of this chip shortage megatrend, as it controls the "chokepoint equipment"—EUV/DUV lithography systems—for advanced chip production expansion. Whether it's TSMC behind the Nvidia ecosystem, or Samsung, SK Hynix, Micron, and Intel, expanding production of advanced logic, HBM/DRAM, and AI compute infrastructure-related chips is inseparable from ASML's lithography tools.
The first chips manufactured using ASML's latest High-NA EUV tools will be available within months. High-NA enables feature size reductions of up to 66%, and Intel, Samsung, and SK Hynix are progressing with adoption. This further strengthens ASML's strategic position in the post-2nm era and the manufacturing of AI logic chips and advanced memory.
ASML's latest forecasts also significantly reinforce the long-term bull case for global chip stocks. AI data centers, Starlink satellites, embodied AI robots, autonomous driving, and future TeraFab-level super-chip factories will expand chip demand from singular cloud training to a broader ecosystem of cloud AI inference, physical AI, and edge AI cloud connectivity. This provides long-term, robust fundamental expansion support for global chip leaders like ASML Holding NV, TSMC, SK Hynix, Micron, Nvidia, AMD, Intel, Applied Materials, and Lam Research. ASML's CEO predicts the global semiconductor market could reach a staggering $1.5 trillion by 2030, compared to a market size of approximately $800 billion as of 2025.
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