ASML to reap benefits from demand from Low-NA EUV adoption

BofA Securities reiterated a Buy on ASML and raised its price target to €1,710 from €1,598, citing stronger-than-expected Low-NA EUV demand and improving earnings forecasts. The firm lifted 2026-2028 Low-NA EUV shipment estimates to 65, 85, and 87 units and increased 2028 EPS estimates to €58.1, with revenue projected near €57.8 billion. The report suggests High-NA adoption will be slower than expected, but ASML’s near-term growth remains supported by advanced chip demand tied to AI and memory production.

Analysis

The market is still underestimating the value of ASML’s installed base and service attach. If Low-NA utilization rises while High-NA adoption slips, the earnings mix shifts toward higher-margin service, spares, and productivity upgrades rather than frontier tool shipments — a much cleaner compounding model with less cyclicality than the headline suggests. That matters because the valuation should increasingly track recurring revenue quality, not just unit growth.

The second-order winner is not just ASML but the memory complex, especially if DRAM and HBM makers front-load EUV intensity to support AI memory stacks. That creates a more durable capex impulse for Samsung and SK Hynix than the market typically assigns, while TSMC’s delayed High-NA timing reduces near-term disruption but also signals that leading-edge logic nodes may be constrained by design economics rather than tool availability. Intel benefits only if its process roadmap can absorb the productivity gains faster than peers; otherwise this remains a relative loser in share-of-wallet.

The key risk is that the bullish thesis becomes consensus before the earnings re-rate finishes. If High-NA delay is already broadly expected, the next positive surprise has to come from upward shipment revisions, service mix, or faster EUV layer expansion in AI chips; absent that, ASML can drift sideways for months despite strong fundamentals. The more dangerous bear case is that logic customers stretch node transitions further, which would defer incremental demand and compress multiple expansion into a later window rather than killing it outright.

Contrarian read: this is less a "High-NA disappointment" story than a "Low-NA scarcity premium" story. The market may be too focused on the technology roadmap and not enough on near-term bottlenecks in capacity, which argues for a better-than-expected earnings runway over the next 6-12 quarters even without a breakthrough adoption cycle.

Key Decisions for Investors

• Stay long ASML on pullbacks over the next 1-3 months; prefer equity over upside calls because the thesis is a slow-burn multiple expansion driven by service mix and shipment revisions, not a binary catalyst.
• Pair trade: long ASML / short a basket of lagging semiconductor equipment names with weaker EUV exposure over 3-6 months; risk/reward favors ASML if the market keeps paying up for recurring revenue and installed-base monetization.
• Overweight TSMC only tactically, not structurally, for the next 6-12 months; the delayed High-NA timeline reduces near-term capex urgency and caps relative upside versus ASML.
• Add selective exposure to memory-enabling names tied to AI HBM/DRAM capex over the next 12-24 months; the best second-order beneficiary is the one with the cleanest pricing power on advanced memory demand, not the logic foundry headline.
• Avoid chasing INTC on this print unless there is evidence of faster EUV layer adoption in its roadmap; the upside is real but execution risk still dominates, making the risk/reward inferior to ASML.