Just short of €15 billion was wiped from the value of ASML Holding NV (NASDAQ:ASML), the Dutch semiconductor equipment manufacturer, after it was downgraded to "neutral" from "buy" by UBS due to expectations of slowing earnings growth over the coming years.
In a research note published on Wednesday, the Swiss investment bank cited a shift in the market environment and forecast a decline in ASML's earnings potential, marking a shift in sentiment toward one of Europe's top tech companies.
It now predicts that ASML's earnings per share (EPS) will grow at a compound annual growth rate (CAGR) of 13% between 2025 and 2030, down from 24% in the 2018-2025 period.
This slowing growth rate, UBS argues, justifies a "normalisation" of the company's valuation relative to its industry peers. UBS also noted that while ASML may see short-term gains in 2025, driven by strong orders, the outlook for 2026 and 2027 suggests potential downside risks.
UBS pointed to several factors contributing to the downgrade. The bank expects a plateau in demand for lithography technology, which ASML specialises in, as the semiconductor industry experiences a slowdown in demand for advanced chips used in both logic and memory production.
Additionally, it estimates that ASML's revenue from artificial intelligence (AI) applications will not be enough to offset the decline, accounting for just 10-15% of total sales over the next three to five years.
The report also highlighted potential challenges in China, where tighter export controls and overspending in the semiconductor sector may impact ASML's sales.
UBS also lowered its price target for ASML shares to €900 from €1,050, reflecting these concerns about future growth.
In morning trading, the stock was off €39.50 at €743.30.