ASML’s Rally Tests Investor Conviction as Morningstar Calls ‘Sell’ and UBS Sees €1,900

ASML shares hit €1,378.60, up 39% YTD, but Morningstar issues 'Sell' rating citing stretched valuation. UBS maintains Buy with €1,900 target as AI cycle fuels demand.

ASML Holding has been on a tear. The Dutch lithography giant’s shares have climbed roughly 39 percent since the start of the year, hitting €1,378.60 — just shy of the 52-week high of €1,420.80. Over the past twelve months, the stock has more than doubled. Yet that blistering run has pushed valuation to levels that even some analysts find uncomfortable.

Morningstar slapped a “Sell” rating on the stock this week, arguing the price has simply run too far ahead of fundamentals. The call came as the shares were hovering near their recent peak. Morningstar points to a price-to-earnings multiple of 57, well above the five-year average of 39. Other valuation metrics look equally stretched: the stock currently trades about 11 percent above its 50-day moving average, and one independent estimate from Simply Wall St pegs the overvaluation at as much as 106 percent relative to fair value.

Not everyone agrees. UBS retains a Buy with a €1,900 price target, arguing the investment cycle for AI chips will run at least until 2028. ASML is the sole supplier of the extreme ultraviolet (EUV) lithography systems needed to manufacture the most advanced semiconductors — a position that makes it indispensable to the entire AI infrastructure buildout. The recent surge in demand for high-bandwidth memory from SK Hynix and Micron, each of which crossed the $1 trillion market-cap mark in late May, underscores the momentum.

Strong books, higher guidance

The debate over valuation plays out against a backdrop of solid operational performance. In the first quarter of 2026, ASML reported revenue of €8.77 billion and earnings per share of €7.15 — both ahead of consensus forecasts. Management subsequently raised its full-year guidance for 2026, pointing to higher average selling prices for EUV systems. For the full year 2025, the company reported revenue of $32.66 billion, up 15 percent year on year, with net profit of $9.6 billion.

The strong order book has kept most sell-side analysts in the “Hold” camp. The average price target is around €1,500, with higher estimates reaching as high as €1,721. The market itself values ASML at roughly $622 billion.

Geographic diversification gathers pace

While analysts squabble over the multiple, ASML is quietly expanding its footprint. In Taiwan, the company plans to hire 1,000 new employees to bolster support for its largest customers. In India, it has signed a memorandum of understanding with Tata Electronics — an early foray into the subcontinent’s nascent semiconductor ecosystem.

The moves come as the European Union pushes ahead with a second “European Chips Act”, designed to give Brussels emergency powers over critical chip supply chains. Europe’s share of the global chip market could slip to around 6 percent by 2026, and policymakers see ASML as the continent’s indispensable asset. The company owns a factual monopoly on EUV technology, making it the centerpiece of any European chip strategy.

China: The long-term wild card

The biggest risk to the ASML growth story may not be valuation but geopolitics. China has pledged to cover 70 percent of its own chip needs by the end of 2025 and to achieve near-total self-sufficiency by 2035. Beijing is pouring over $150 billion into its domestic semiconductor industry. Export restrictions already limit ASML’s shipments to China, and if Beijing’s independence drive succeeds, one of its most important end-markets could shrink significantly over the next decade.

For now, though, AI demand shows no signs of slowing. ASML’s next proving ground will be the half-year results, due in the coming weeks. If management reaffirms the upgraded guidance, the valuation debate is likely to heat up once again. Whether that favors the bulls or the bears depends entirely on how long the chip investment super-cycle lasts — and whether China can accelerate its timeline.