As the closely watched US earnings season officially kicks off on Tuesday, semiconductor equipment giant ASML Holding NV faces a crucial "earnings test" following a nearly 50% surge in its stock price over the past month. The rally has been driven by global investors betting that accelerating artificial intelligence infrastructure development will spur major chipmakers like Taiwan Semiconductor Manufacturing Company to significantly expand their 3nm and below chip production capacity, thereby boosting semiconductor equipment orders.

ASML's best single-month stock performance in two decades has put the Dutch semiconductor equipment manufacturer's earnings report, due tomorrow, squarely in the global financial market spotlight. Latest market data shows ASML's US ADR shares have gained 45% year-to-date, including a surge of over 40% since September, while its European listing has posted slightly smaller gains.

Since September, ASML's stock has entered a significant upward trajectory, catalyzed by the transition of next-generation High-NA EUV lithography systems from laboratory validation to chip manufacturing deployment, as well as its investment in Mistral AI. ASML's US ADR is trading around $984, while the European shares hover near €840.

The Netherlands-based semiconductor equipment manufacturer reclaimed its position as Europe's most valuable listed company in September and recorded its best single-month performance in twenty years. Over the past two months, at least four Wall Street financial institutions have upgraded their ratings and price targets for ASML, particularly after significant improvements in the business prospects of its key chip manufacturing clients Intel Corp. and Samsung Electronics Co Ltd.

**Market Focus on ASML Earnings Details**

Ahead of Wednesday's crucial earnings release, the key question amid heightened expectations is whether ASML management can provide stronger 2026 guidance than what was offered in July. As renewed US-China trade tensions add market uncertainty, investors are actively seeking more evidence that semiconductor equipment companies can substantially profit from this unprecedented AI boom.

"The market will focus on ASML's 2026 business outlook - investors now want to see whether the aggressive expansion of AI chip-related capital expenditure from chipmakers like TSMC and Samsung Electronics is beginning to flow through to the order books of semiconductor equipment giants like ASML," said Reinder Wietsma, portfolio manager at Centive Global Equity Fund.

ASML is the sole global supplier of EUV lithography equipment essential for manufacturing the most advanced AI chips. In July, the company stated it could not confirm 2026 growth expectations due to global trade frictions, causing its stock to plunge 11% on the earnings day and dragging down semiconductor sector peers.

Subsequently, a US-EU agreement exempting strategic items including semiconductor equipment from tariffs cleared one major obstacle for US customer orders. Combined with the robust global AI infrastructure development wave, this has continued to drive up shares of ASML and other semiconductor equipment companies.

However, the recently escalated US-China trade war continues to pose disruption and threats to ASML's fundamental outlook. The company heavily relies on rare earth materials from China, and with the Trump administration expanding sanctions to include subsidiaries of blacklisted companies, risks of tighter restrictions on ASML's shipments of mature-process lithography equipment to the world's second-largest economy are rising significantly.

There are also concerns that Chinese chipmakers may reduce related spending after years of stockpiling lithography equipment.

**Client Recovery Boosts Investor Sentiment**

Investor sentiment has been recently lifted by signs of business recovery from ASML's two major clients - Intel and Samsung Electronics. Intel has received substantial investments from AI chip leader NVIDIA and the US government, providing "ample ammunition" for potentially boosting future capital expenditure. With the unprecedented combination of x86 and NVIDIA GPU products, future demand for x86 architecture CPUs and NVIDIA AI GPU compute clusters in the chip industry chain is set to surge.

Samsung's underperforming chip foundry business is turning around, with its upcoming major chip manufacturing facility in Texas securing orders to produce AI and FSD high-performance chips for Elon Musk's Tesla Inc., requiring additional investment. Meanwhile, multiple reports indicate Samsung's advanced memory chips have been approved for use in NVIDIA's Blackwell flagship AI server clusters.

Despite Samsung's recent positive news flow, a key uncertainty remains whether Samsung can also gain approval from NVIDIA for next-generation HBM4 memory chips, viewed as a potential swing factor for ASML's order surge starting next year.

Barclays analyst Simon Coles noted that improvements in these two companies' fundamental prospects may not come quickly enough to help ASML's lithography equipment bookings in Q3. He stated that Intel may have already locked in all needed EUV lithography systems, while Samsung's foundry division - despite better prospects now - is "unlikely to be a significant contributor to orders in the near term."

According to compiled institutional data, ASML ADR options imply post-earnings volatility of up to 7%, the second-largest expected volatility in three years.

**Valuation Concerns After Recent Rally**

For investors, ASML's valuation no longer appears cheap following recent strong gains. Based on two-year forward earnings per share - a key metric given the long delivery cycles of its advanced EUV equipment - the stock's forward P/E ratio has risen to 28x, above the five-year average of 27x.

According to JPMorgan's institutional sales desk statistics, ASML's recent ADR rally has been primarily driven by hedge fund buying, with most long-term institutional investors remaining on the sidelines. While the market's improved outlook for ASML in 2026 may be welcomed by hedge funds, long-term investors worry that "ASML management may still disappoint investors regarding order outlook clarity."

**Wall Street Maintains Bullish Outlook**

Wells Fargo recently published a bullish research report on the semiconductor equipment industry, stating that as AI infrastructure development led by tech giants Microsoft, Google, and Meta intensifies, comprehensively accelerating 3nm and below advanced process chip expansion and advanced packaging capacity growth, the long-term bull market logic for the semiconductor equipment sector remains very solid.

ASML is among the semiconductor equipment stocks Wells Fargo favors long-term. The bank stated that all news about catalyzing advanced AI chip capacity is positive for semiconductor equipment. It noted that much more complex architectural updates and higher-performance CPU/GPU heterogeneous packaging (based on NVLink interconnects and CoWoS/EMIB/Foveros chiplet advanced packaging) will significantly boost structural demand for EUV/High-NA lithography, advanced packaging equipment, and inspection metrology, particularly benefiting ASML, Applied Materials, and KLA Corporation.

Wells Fargo reiterated its "Overweight" rating on ASML ADR, raising its price target significantly from $890 to $1,105. The bank emphasized that High-NA lithography demand in the 2nm process era will be a strong driver for both ASML's performance and stock price growth.

Driven by strong expansion in High-NA (high numerical aperture) EUV lithography demand from chip manufacturing giants including SK Hynix, TSMC, Samsung, and Intel, as High-NA transitions from initial validation to chip manufacturing deployment stages, ASML is expected to return to a "strong compound growth" trajectory.

Additionally, some institutions have long-term concerns about ASML competing with other core segments in chip manufacturing processes for capital investment, as more expensive advanced lithography equipment is no longer the only component needed for the lithography segment in manufacturing higher-performance and more architecturally powerful chips.

Richard Clode, portfolio manager at Janus Henderson, said he has been increasing holdings in semiconductor equipment companies recently but focuses more on companies producing deposition and etching-related semiconductor equipment. Compared to semiconductor equipment companies, he prefers stocks that can directly benefit from the AI infrastructure spending wave, such as NVIDIA and HBM memory chip manufacturers.

"I still think (equipment) is not as strong as more direct compute or memory plays, and equipment spending cycles are also distorted by geopolitical situations and China's equipment stockpiling in recent years," Clode said in an email.