ASML Holding NV (NASDAQ:ASML, ETR:ASME) has been upgraded to 'buy' by UBS, which sees the semiconductor equipment maker as poised to return to form as a “quality compounder” from 2027 onwards.
The bank highlighted that the market has already priced in concerns over weakening lithography intensity and uncertainty in China, with the shares down 30% from all-time highs in the summer of 2024.
With long product lead times and deep integration into customers’ roadmaps, UBS believes investors will look through the near-term softness in 2026, which has been "well telegraphed" by the company, to a strong recovery thereafter.
The "key driver" of that inflection will be the A14 production ramp at TSMC (NYSE:TSM), where the chip manufacturer is moving to 1.4nm process technology.
That means exposure to ASML's extreme ultraviolet (EUV) lithography machines is expected to increase, alongside the introduction of the next-generation High NA lithography from 2028-29, designed to print even smaller, more advanced features on chips.
UBS expects backlog orders for the new technology as early as 2026.
While ASML faces a muted near-term outlook, the Swiss bank sees catalysts including 2026 guidance (expected at the Q3 results in October), new EUV models, and customer announcements from Intel and Samsung.
The price target for the Dutch group to €750 from €660, citing higher confidence in High NA adoption, and sees the stock’s current valuation of 24x 2027 earnings as attractive relative to its long-term average.