Jefferies downgrades ASML and ASM on 2026 demand weakness, DRAM slide

Jefferies has downgraded ASML and ASM International to Hold, citing an anti-consensus forecast for a 1% decline in 2026 wafer fab equipment (WFE) spending, sharply diverging from market expectations of 10-20% growth. This bearish outlook stems from projected significant drops in DRAM and China WFE, weakening order trends, and geopolitical risks, leading to Jefferies' 2026 revenue and EPS estimates for both companies being notably below consensus. The brokerage anticipates deteriorating semiconductor capital equipment newsflow over the next 6-9 months due to macro uncertainty, regulatory risks, and softening memory demand, despite some strength in ASM's advanced logic.

Analysis

Jefferies has downgraded ASML and ASM International from Buy to Hold, pivoting to a notably bearish, anti-consensus outlook for the semiconductor equipment sector in 2026. The firm projects a 1% year-over-year decline in wafer fab equipment (WFE) spending, a stark contrast to the market consensus of 10-20% growth. This forecast is underpinned by an anticipated 16% drop in DRAM WFE and an 8% contraction in China's WFE spending. For ASML, this translates to 2026 revenue and EPS estimates that are 9% and 17% below consensus, respectively, with warnings of weakening memory orders, which fell 33% year-over-year in the six months to Q1 2025. Similarly, ASM International's 2026 revenue growth is projected at only 3%, far below the 15% consensus, as a prior surge in memory-related revenue is expected to reverse. The downgrade is further contextualized by significant geopolitical risk, particularly the high 2025 China sales exposure for ASML (26% of total) and the potential for new U.S. export restrictions. Despite raising price targets, which suggests the stocks are considered fairly valued at current levels (30-31x 2026 P/E), Jefferies anticipates a period of deteriorating newsflow for the sector over the next six to nine months.

Key Decisions for Investors

• Investors should critically re-evaluate bullish positions in ASML and ASMI, as Jefferies' anti-consensus forecast for a 1% decline in 2026 WFE spending presents a significant risk to earnings expectations.
• Monitor order intake and backlog trends for both companies, particularly in the DRAM and HBM segments, as these are the primary leading indicators cited for the expected downturn.
• Pay close attention to any developments regarding U.S. export controls on China, as this represents a key geopolitical catalyst that could accelerate the negative trend forecasted by Jefferies.
• Given the Hold rating and raised price targets, the analysis suggests near-term upside is limited rather than an imminent collapse, so investors may consider holding existing positions while exercising caution on initiating new ones until the forecasted headwinds subside.