Morgan Stanley is bullish on ASML Holding NV, stating that the stock could have up to 70% upside in its most optimistic scenario, as chipmakers ramp up spending to meet a surge in artificial intelligence demand.

The Dutch chip equipment manufacturer is one of Morgan Stanley's top picks. Analysts at Morgan Stanley said their view on ASML has become more positive after its largest client, Taiwan Semiconductor Manufacturing Company, indicated that the AI-related investment boom has not cooled down. ASML's stock has risen 25% year-to-date in 2026, marking a strong start to the year.

Analysts, including Lee Simpson, wrote in a report dated Thursday: "We are reinforced by expectations for increased capital expenditure in the foundry and memory segments in 2027, coupled with demand from China that is better than previously pessimistic forecasts."

In the bank's bull case, ASML's share price could climb as high as €2,000 if profits exceed its expectations and valuations for tech stocks continue to soar. Its base-case scenario sees the stock reaching its price target of €1,400. Data compiled by Bloomberg shows this target price is the second-highest among Wall Street brokerages.

ASML's stock rose 1.2% on Friday to €1,163. Its market capitalization surpassed $500 billion this week, making it only the third European company to reach this milestone.

The core rationale for Morgan Stanley's optimism is robust demand for ASML's specialized chip-making equipment, which is driving strong earnings. The bank forecasts that ASML's earnings per share will reach approximately €46 in 2027, nearly doubling from the level expected in 2025.