Analyst Projects 70% Gain for ASML as Semiconductor Capital Spending Accelerates

ASML Holding could deliver substantial shareholder returns over the next two years, according to new projections from Morgan Stanley. The investment bank’s latest research outlines a scenario in which the Dutch maker of lithography systems benefits directly from a wave of spending by the world’s leading chip manufacturers, potentially pushing the company’s share price 70 percent higher and nearly doubling earnings per share by 2027 compared with 2025 levels.

Key role in advanced chip production

ASML remains the sole supplier of extreme ultraviolet (EUV) lithography machines, the equipment required to fabricate chips measuring seven nanometers and below. These advanced semiconductors are central to servers, smartphones and other devices designed for artificial intelligence workloads that demand both computing power and energy efficiency. Because no alternative EUV provider exists, foundries and memory producers expanding capacity must turn to ASML, placing it at the center of current and planned capital-expenditure programs.

Foundry spending continues to rise

Taiwan Semiconductor Manufacturing Company (TSMC), the dominant independent foundry, recently said it will raise 2026 capital expenditures by 32 percent to $54 billion, based on the midpoint of its guidance. Approximately 70 percent to 80 percent of that budget has been earmarked for advanced process nodes that rely on EUV tools. The scale of TSMC’s outlay signals sustained demand for ASML systems, which can cost more than $150 million each and generally ship in multi-unit clusters to new fabrication lines.

Industry analysts note that TSMC’s spending plans outpace the broader semiconductor market, emphasizing expectations for robust demand in high-performance computing and AI accelerators. According to data from the Semiconductor Industry Association, global semiconductor sales are projected to climb at a mid-to-high single-digit compound annual growth rate through the end of the decade, lending further support to aggressive capacity expansions.

Memory makers confront supply constraints

Beyond logic chips, the memory segment is experiencing its own bottlenecks. High-bandwidth memory (HBM), a key component in data-center graphics processing units that train and run large AI models, is in short supply. Micron Technology’s management has responded by authorizing $20 billion in capital expenditures for the current fiscal year, a 45 percent increase over the previous period. Industry peers Samsung Electronics and SK Hynix have also indicated that they will maintain elevated spending levels to keep pace with demand.

Memory manufacturers use EUV lithography to reach finer geometries that boost performance while reducing power consumption, a critical requirement for HBM production. As these companies move deeper into single-digit nanometer nodes, each expansion or technology migration translates to additional orders for ASML’s systems and related services.

Earnings trajectory highlighted by Morgan Stanley

In its report, Morgan Stanley projects ASML’s earnings almost doubling between 2025 and 2027. The firm points to a pipeline of confirmed equipment bookings, an expanding installed base that generates recurring service revenue and a backlog stretching beyond one year for flagship EUV platforms. The analysis assumes no material disruption to the global semiconductor supply chain and factors in stable pricing for ASML’s newest Twinscan NXE and EXE models.

The bank’s upside scenario assigns a 70 percent share-price appreciation from current levels, largely driven by anticipated margin expansion as economies of scale and higher utilization rates flow through the income statement. Morgan Stanley cautions that foreign-exchange movements, component shortages or delays in customer factory build-outs could temper results, yet it views industry capital-spending commitments as strong indicators of future demand.

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Competitive landscape remains limited

While several equipment makers provide deep ultraviolet (DUV) lithography systems, ASML’s EUV technology has no direct rival. The company invested more than a decade in developing high-wattage light sources, vacuum chambers and optics aligned to extreme ultraviolet wavelengths. Those engineering hurdles and the immense cost of replication create high barriers to entry. As a result, foundries and memory suppliers facing time-to-market pressures prefer to place incremental orders with ASML rather than consider unproven alternatives.

Share performance tracks sector momentum

Over the past 12 months, ASML shares have advanced 75 percent, outperforming the PHLX Semiconductor Sector Index, which gained 47 percent. Investors have gravitated toward companies with direct exposure to AI infrastructure, and ASML’s backlog offers clear visibility into mid-term revenue. Should the spending plans outlined by TSMC, Micron and other customers materialize on schedule, analysts foresee further momentum for the stock.

Outlook hinges on continued AI demand

Market forecasts indicate that AI workloads will keep growing as enterprises deploy generative models, autonomous systems and edge applications. To support these compute-intensive tasks, chipmakers are racing to deliver smaller, more efficient architectures, a shift that reinforces the need for EUV tools. Industry observers expect additional capacity announcements over the coming quarters, with emerging players in China, Europe and the United States also weighing greenfield fabs that could require ASML equipment.

Morgan Stanley’s research positions ASML as a key beneficiary of these trends, citing the company’s technology lead, pricing power and entrenched customer relationships. Although the magnitude of its projected 70 percent upside will depend on execution across the semiconductor supply chain, the bank maintains that ASML’s earnings are poised for significant expansion as long as capital spending remains elevated and EUV adoption rates continue to climb.

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