ASML Shares Surge as Analysts Revise Targets on AI and TSMC Momentum

ASML USN070592100

A wave of analyst upgrades, fueled by robust investment plans from a key client and the enduring artificial intelligence boom, has propelled shares of semiconductor equipment giant ASML to a record valuation. The company recently surpassed a $500 billion market capitalization, becoming only the third European firm to reach that milestone, as market expectations pivot toward significantly higher earnings beginning in 2027.

A broad consensus is forming among research firms, with Morgan Stanley issuing one of the most notable revisions. The bank increased its price target for ASML from €1,000 to €1,400, representing a 40% uplift. Analyst Lee Simpson maintained an "Overweight" rating and designated the stock a "Top Pick" for the 2027 timeframe.

In a more optimistic "Bull Case" scenario, Morgan Stanley envisions a potential share price of €2,000, which would imply an approximate 70% gain from current levels. This outcome is contingent on sustained high valuations in the technology sector and earnings exceeding current projections. The bank's core model for fiscal 2027 includes:
- Revenue of approximately €46.8 billion
- Earnings per share (EPS) of around €45.7
- Year-over-year profit growth of 57%
- Expected delivery of 80 extreme ultraviolet (EUV) lithography systems

TSMC's Spending Plans Provide Immediate Catalyst

The recent upward move was significantly triggered by updated capital expenditure guidance from Taiwan Semiconductor Manufacturing Company (TSMC), a primary ASML customer. The foundry giant indicated plans to invest between $52 billion and $56 billion in 2026. Analysts at Bank of America noted that this capex forecast "significantly" surpassed prior market expectations, providing near-term tailwinds for ASML. They emphasized that EUV and other high-end equipment are central to achieving efficiency gains in chip production.

Since TSMC's announcement, ASML's share price has advanced roughly 7%, bringing its year-to-date gain to about 25%.

The Critical Role of a Key Client

ASML's unique position as the world's sole supplier of EUV lithography systems secures it the majority of orders for the most advanced manufacturing nodes. JPMorgan analysts point to rising chip industry investment budgets starting in late 2026 as a crucial long-term driver for the stock's performance.

Memory Chip Demand Adds Further Fuel

The AI expansion is driving growth not only in logic chips but also in the memory market. According to Counterpoint Research, prices for memory chips could rise an additional 40% to 50% in the first quarter of 2026. Memory manufacturers are responding with capacity expansions, which in turn generates supplementary demand for advanced manufacturing equipment.

JPMorgan also highlighted that Samsung, as the only major DRAM producer with available cleanroom capacity currently, is expected to place particularly substantial follow-on orders.

A Consensus of Upgrades

The positive sentiment is widespread across sell-side research. Recent rating and target changes include:
- Wells Fargo: Raised its price target from $1,140 to $1,450
- KGI Securities: Upgraded from "Hold" to "Outperform," with a €1,415 target
- Sanford C. Bernstein: Changed its rating from "Hold" to "Buy"
- Mizuho: Lifted its view from "Neutral" to "Outperform"

The current analyst consensus shows three "Strong Buy" recommendations, nineteen "Buy" ratings, and eight advising "Hold."

Upcoming Earnings in Focus

ASML is scheduled to report its fourth-quarter results on January 28. Market participants will scrutinize new order bookings for early signs of the strength Morgan Stanley anticipates over the next two to three quarters.

In its most recent quarterly report, the company posted earnings per share of $6.41, exceeding the consensus estimate of $6.27. Quarterly revenue came in at $8.80 billion, slightly below the market expectation of $8.99 billion.

Trade Policy Provides Indirect Support

Additional support for the outlook comes from recent trade developments. A new U.S. trade agreement has capped tariffs on imports from Taiwan at 15%. In return, Taiwanese semiconductor firms, including TSMC, have committed to a minimum of $250 billion in investments for U.S.-based production capacity. This agreement bolsters the medium-term prospects of ASML's most important client, thereby indirectly supporting the future trajectory of ASML's order book.