International financial institution UBS recently released a research report stating that despite reaching successive all-time highs since 2026, shares of Dutch-based lithography giant ASML Holding NV still possess substantial bullish upside potential. The UBS analyst team maintained its "Buy" rating on ASML and significantly raised its 12-month target price from 1030 euros to 1400 euros. The primary rationale is based on stronger capital expenditures driven by expansions in advanced-node logic chip capacity and high-performance memory chip capacity, more optimistic revenue expectations from the Chinese market, and UBS's substantial upward revisions to its already robust core earnings growth forecasts for ASML in both 2026 and 2027. In European stock markets, ASML, often dubbed the "pinnacle of human technology," closed at 1154 euros on Wednesday. Since 2026, fueled by the AI computing infrastructure construction frenzy and the "memory chip supercycle," particularly amplified by TSMC's significant increase in annual capital expenditure and its earnings outlook far exceeding market consensus, ASML's stock has surged by 25%, repeatedly hitting record highs. Major investment firms like UBS, Citigroup, and KeyBanc view ASML as having entered a new, powerful "main uptrend wave."

In the U.S. stock market, ASML's American Depositary Receipts (ASML.US) have also shown strong momentum since 2026, frequently setting new record highs, with a single-day jump of over 8% on January 2nd and a year-to-date surge of 27%, bringing its current market capitalization to a staggering $527 billion. The U.S. semiconductor equipment sector has exhibited remarkable strength since the start of the year. Lam Research (LRCX.US), focused on etching/deposition and related processes, has consistently reached new highs since the second half of 2025, climbing 33% year-to-date in 2026. Applied Materials (AMAT.US), which supplies nearly the full suite of high-end semiconductor equipment for chip fabrication plants, has also repeatedly hit record highs in early 2026, with a year-to-date increase of 28%. These three semiconductor equipment giants have significantly outperformed both the S&P 500 and the tech-heavy Nasdaq 100 index.

Top Wall Street investment firms KeyBanc Capital Markets and Citigroup have both recently published reports suggesting the global semiconductor industry is poised for a year of robust demand. They specifically highlighted that against the macro-backdrop of the ongoing global AI computing infrastructure build-out and the "memory chip supercycle," semiconductor equipment manufacturers like ASML, Lam Research, and Applied Materials are entering a supercycle of their own. These companies stand to be among the largest beneficiaries of the rapid capacity expansion for AI chips (including AI GPUs/AI ASICs) and DRAM/NAND memory chips, as well as the supply shortages for high-performance server-grade CPU components from Intel and AMD.

With the AI infrastructure frenzy and memory chip supercycle sweeping the globe, ASML emerges as one of the biggest winners. Virtually all recent catalysts related to demand and capacity expansion for advanced-node AI chips and memory chips are positive for semiconductor equipment. As tech giants like Microsoft, Google, and Meta lead an intensifying global build-out of hyperscale AI data centers, this comprehensively accelerates chipmakers' expansion of sub-3nm advanced-node AI chip production, CoWoS/3D advanced packaging capacity, and DRAM/NAND memory chip capacity, thereby solidifying the long-term bullish thesis for the semiconductor equipment sector. A recent report from Wall Street giant Citigroup identifies the semiconductor equipment sector as a primary beneficiary of exploding AI computing and memory demand. Citigroup predicts the sector will enter a "Phase 2 bull market cycle," suggesting a new bullish trajectory following the supercycle of 2024-2025. The report clarifies that the key investment strategy for chip stocks in 2026 is not a "broad bullish stance on semiconductors," but a specific focus on leading Wafer Fabrication Equipment (WFE) players—namely ASML (ASML.US), Lam Research (LRCX.US), and Applied Materials (AMAT.US).

ASML's EUV lithography machines—and it remains the sole manufacturer—enable customers to advance from 7nm processes to the 3nm advanced nodes used by NVIDIA and Apple. The High-NA EUV machines are designed to push geometries to 2nm and beyond. Smaller circuits on a chip translate directly to superior performance. For the 2nm-and-beyond node manufacturing technologies being developed by TSMC, Intel, and Samsung Electronics, ASML's newly introduced high-NA EUV lithography machines are indispensable. The High-NA's 0.55 numerical aperture, combined with anamorphic optics, delivers enhanced resolution and new boundaries for mask and process integration, making it a powerful tool for accelerating advanced nodes, reducing multi-patterning steps, and improving critical dimensions and overlay control.

The UBS analyst team emphasized in its report that ASML's EUV lithography machines are essential equipment for TSMC, Samsung Electronics, and other leading chipmakers to produce the AI computing clusters that power cutting-edge global AI applications like ChatGPT and Claude, a trend fueled by the unprecedented AI boom since 2023. Simultaneously, these machines are crucial for memory giants like SK Hynix and Micron Technology to build HBM memory systems and core storage devices like data center enterprise SSDs/DDR modules amid the current "memory supercycle," which may persist until 2027. Performance leaps in AI GPU/AI ASIC accelerators heavily depend on advanced logic nodes (from 3nm to 2nm, or even more advanced 1.8nm, 1.6nm), whose critical layers require EUV or even High-NA EUV to achieve smaller line widths and higher yields. ASML's EUV/High-NA EUV equipment is explicitly designed for the volume production needs of 3nm, sub-2nm logic, and world-leading DRAM, positioning it as a "scarce, bottleneck capital good" for accelerated advanced-node chip capacity expansion. Concurrently, AI training/inference is igniting demand on the "memory side": HBM systems and enterprise data center SSDs paired with AI GPUs/ASICs require both DRAM and SSD controller chips to continue relying on EUV lithography (or potentially High-NA) for process scaling, and also necessitate a significant increase in manufacturing steps and equipment density for etching, thin-film deposition, CMP processes, and most critically, stacking, packaging, and interconnect steps (like TSV/hybrid bonding advanced packaging).

Since last September, catalyzed by the transition of the more expensive next-generation High-NA EUV lithography machines from lab validation to fab deployment and the investment in Mistral AI, ASML's stock price has clearly entered an upward trajectory, recently hitting new all-time highs on multiple occasions. ASML's U.S. ADRs (ASML.US) recorded their best monthly performance in two decades last September, culminating in a full-year 2025 gain of 60%, and have continued this strong momentum into the current year. The UBS analyst team stresses that the core logic behind this is investors' expectations that accelerated AI infrastructure projects will drive chipmakers like TSMC to significantly expand sub-3nm advanced AI chip capacity and prompt SK Hynix to increase production of HBM and data center enterprise SSD components. Furthermore, the growing reliance of CoWoS/3D advanced packaging systems on "specialized solutions" based on EUV lithography is expected to drive a surge in orders for ASML's EUV equipment.

Even after the substantial stock price appreciation, UBS maintains its "Buy" rating on ASML and has raised its 12-month target price to 1400 euros (from 1030 euros), with a most optimistic bull-case target of 1650 euros, while also significantly upgrading its revenue and profit forecasts for 2026/2027. Additionally, UBS believes ASML's Q4 2025 earnings (to be disclosed on January 28th) and future lithography tool orders/guidance are highly likely to exceed market expectations. UBS bets that Q4 lithography system orders could reach as high as 9 billion euros under its model, far exceeding the previous quarter's 5.4 billion euros, implying strong medium-term bullish momentum sufficient to support further valuation expansion for ASML.

UBS's core underlying framework for the semiconductor equipment sector posits that the resonance of strong capital expenditure in advanced-node logic chips and memory chips (especially DRAM/HBM-related) makes the equipment cycle more "structural" than purely short-term cyclical. Within this, ASML, due to the scarcity of its exclusive EUV technology and the High-NA iteration, possesses stronger pricing power and order visibility during the industry upswing. In its research report, UBS directly links its upward revision of ASML's earnings to TSMC's 2026 capital expenditure guidance of $52-$56 billion (implying a 28%-37% year-on-year increase for TSMC's capex) and assumptions of a recovery in memory capex, emphasizing the importance of robust overall demand for "High-NA level lithography tools" for valuation anchoring within the trends of high-end AI chip manufacturing and high-performance memory chip capacity expansion.

Demand for DRAM/NAND memory chips remains robust, with prices for these product series (e.g., DDR4/DDR5/enterprise SSD series) showing vigorous expansion, primarily because the torrent of AI computing demand has elevated the importance of memory chips for AI training/inference systems to unprecedented levels. Global AI computing demand continues to exhibit exponential growth trends, with supply struggling to keep pace with demand intensity, a fact starkly evident in the exceptionally strong quarterly results announced by the "world's chip king," TSMC (TSM.US), on Thursday. TSMC's Q4 gross margin surpassed 60% for the first time, net profit significantly beat expectations, and the company forecast nearly 30% revenue growth for full-year 2026 while substantially raising its 2026 capital expenditure guidance to $52-$56 billion—both key metrics far exceeding market expectations. Furthermore, TSMC management significantly raised its compound annual growth rate expectation for AI-related chip manufacturing revenue from the "mid-40% range" to the "mid-to-high 50% range." The exceptionally strong results and future guidance from this chipmaking behemoth triggered a broad rally in U.S. chip stocks on Thursday, with memory chips and semiconductor equipment showing particularly strong gains, as TSMC's expanded capex is largely allocated to purchasing various high-end semiconductor equipment covering lithography, etching, deposition, advanced packaging, and testing.

UBS anticipates the semiconductor equipment sector is entering a new "super upcycle," emphasizing that the current AI infrastructure boom is driving a "computing-power—memory—advanced-chip-manufacturing" investment chain, resulting in capex stickiness that is stronger than in any previous cycle. The massive computing demand from AI training/inference not only boosts demand for advanced-node logic chips but also significantly elevates demand for high-end memory chips (especially HBM/enterprise SSD-related). Against the backdrop of increasing chip manufacturing process complexity, the number of "leading-edge process steps per wafer" rises, making it easier for equipment demand to manifest as sustained growth and improved order visibility. UBS has sharply raised its 2026 revenue growth forecast for ASML from 14% to 23%, and its 2027 growth forecast from 9% to 14%. UBS expects ASML's soon-to-be-reported total revenue for Q4 2025 to be approximately 9.747 billion euros (aligning with the midpoint of the company's guidance range of 9.5 billion euros), projects robust 2026 total revenue growth of 23% to 40.149 billion euros, and forecasts 14% growth in 2027 to 45.889 billion euros. Regarding ASML's EPS expectations, UBS forecasts 2026 EPS could reach 33.83 euros (a full 26% above consensus estimates) and 2027 EPS could hit 41.79 euros (25% above consensus). Under its most optimistic EPS scenario (2027 EPS of 47.5 euros), UBS projects ASML's share price could reach 1650 euros.