By Adam Clark

ASML Holding is coming back into favor as a play on the boom in artificial-intelligence and the chips needed to power the technology. Analysts at UBS see grounds for the rally to continue.

ASML's American depositary receipts have gained more than 30% in the past month alone. However, as Barron's recently noted, its performance over the past year is well behind that of other companies in the AI chip supply chain such as Nvidia or Taiwan Semiconductor Manufacturing (TSMC).

The problem has been a slowdown in spending on ASML's most advanced extreme ultraviolet lithography, or EUV, tools by Samsung Electronics and Intel. That has left the Dutch chipmaking machinery company dependent on investment by TSMC, which has been reluctant to commit to buying ASML's latest high numerical aperture, or High NA EUV, machines.

ASML said in its most recent earnings report that it couldn't guarantee growth in 2026. However, UBS's Francois-Xavier Bouvignies thinks it will strike a more upbeat tone when its third-quarter earnings come out on Oct. 15.

"We think Q3s will be solid, and be a sufficient positive to justify the recent move...We continue to expect more favorable newsflow over the next 6-12 months, particularly on high NA opportunities, supporting further upside," Bouvignies wrote.

The UBS analyst sees two major areas of optimism for ASML which could spur spending on its tools -- AI-driven growth in the memory-chip market and better-than-expected sales of smartphones and personal computers.

High-bandwidth memory (HBM) chips are a necessary component of the latest AI processors from the likes of Nvidia and there is a race on to produce the most advanced HBM products. South Korea's SK Hynix is the current leader and it said last month it had assembled a High NA system, which it claimed was the industry's first for mass production.

"Memory accounted for 30% of ASML's revenue in 2024...underscoring its significant exposure to this segment, particularly due to its strong alignment with advanced memory technologies such as HBM, which has seen a sharp increase in EUV layer adoption over the past three years," Bouvignies wrote.

The analyst also forecasts a solid sales performance across smartphones and PCs, two areas increasingly being transformed by AI capabilities. TSMC is the dominant manufacturer of advanced smartphone chips for the likes of Apple and Qualcomm, and mass production of its 2-nanometer chips is likely to require more of ASML's machines.

That means ASML is set to grow its revenue by around 3% in 2026, accelerating to 7% in 2027, according to the UBS forecasts.

Bouvignies raised his price target on ASML's Amsterdam-listed stock to EUR940 ($1,106) from EUR750 previously.

ASML's locally traded shares were down 0.5% at EUR823.70 on Wednesday, while ASML's American depositary receipts edged higher to $970.61 ahead of the open.

Write to Adam Clark at adam.clark@barrons.com

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October 01, 2025 09:08 ET (13:08 GMT)

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