In the global semiconductor industry, particularly propelled by the wave of artificial intelligence, the market capitalization of lithography leader ASML recently surpassed the $500 billion mark, making it the third company in European history to achieve this milestone. This achievement follows TSMC’s strong performance report, highlighting robust market demand for critical chip manufacturing equipment.
Compared to other large-cap European companies, such as luxury giant LVMH or weight-loss drug manufacturer Novo Nordisk, ASML, positioned at the center of the AI investment boom, is viewed by the market as having growth potential that may not have yet reached its ceiling. Morgan Stanley‘s semiconductor analyst team expressed an even more optimistic outlook in a recent research report.
The core view of the Morgan Stanley report is that strong demand for ASML’s specialized chip manufacturing equipment will drive explosive profit growth, which forms the main basis for their positive stance on the stock. The report forecasts that by fiscal year 2027, ASML’s earnings per share could climb to around €46. This not only implies the company’s strongest year-on-year profit growth rate in history at approximately 57%, but also nearly doubles the expected profit for fiscal year 2025. This optimistic projection primarily stems from a “sharp increase” in sales of advanced node equipment, particularly extreme ultraviolet (EUV) lithography systems.
Analysts believe multiple factors collectively support ASML’s optimistic prospects. First, capital expenditure enthusiasm in AI-related areas from its largest customer, TSMC, shows no signs of slowing down. Second, market expectations for capital expenditures in the foundry and memory sectors for 2027 have been broadly revised upward. Morgan Stanley anticipates that, driven by demand from major chip manufacturers like TSMC, Intel, and Samsung, ASML’s EUV system shipments could reach a remarkable 80 units in 2027. Additionally, rising memory chip prices are expected to prompt memory manufacturers to expand capacity, thereby driving demand for ASML’s related equipment. Analyst Lee Simpson emphasized that order activity over the next two to three quarters will strongly validate this growth momentum.
Based on expectations of substantial profit growth, Morgan Stanley has significantly raised its target price for ASML. Under the base-case scenario, the target price is set at €1,400. In the depicted “bull case scenario,” assuming continued outperformance in profits and sustained upward valuation multiples for tech stocks, ASML’s stock price could potentially challenge the level of €2,000. The firm reiterated its “Overweight” and “Top Pick” ratings for ASML, while noting that the current valuation multiple assigned remains at the lower end of the peak range seen in ASML’s historical cycles, implying potential upside.
