Wall Street analysts are expressing growing caution about ASML, the critical chip equipment manufacturer. Recently, UBS downgraded ASML to “neutral” and cut its stock price target from 1,050 euros to 900 euros, pointing to a potential plateau in lithography tool intensity for both logic and memory chips. ASML’s essential EUV technology, which enables the precise printing of complex designs on microchips, has seen a decline in stock value, underpinned by concerns about demand and valuation peaks.
Morgan Stanley echoed UBS’s sentiment, reducing ASML’s price target to 925 euros from 1,000 euros and removing it from their “top pick” stocks. They highlighted the company’s potential overvaluation and the risk of unmet expectations in AI infrastructure spending. Although ASML stocks have surged earlier in 2023 due to AI momentum, they have fallen nearly 30% from their July peak.
Bank of America also adjusted its price target from 1,302 euros to 1,064 euros, citing reduced EBITDA estimates. Despite this, they continue to recommend ASML as a top pick in the EU semiconductor equipment sector, suggesting a recent stock pullback as a buying opportunity.
Analysts have raised concerns about the adoption timeline for ASML’s next-generation “High NA” EUV machines, which are anticipated to enhance chip sophistication. However, issues such as a potential market slowdown in 2026 and the re-usage of existing EUV inventory by chipmakers could impact demand.
Geopolitical tensions, specifically U.S.-China trade restrictions, also pose risks. Although recent Dutch government licensing requirements are deemed a technical change by ASML, they reflect broader economic motivations and could affect long-term sales, particularly in China.
Contrarily, Jefferies remains more optimistic, arguing that a shift toward GAA architecture won’t diminish the demand for ASML’s EUV tools and sees recent market weaknesses as buying opportunities. Jefferies also downplays the impact of U.S. trade restrictions on ASML’s long-term outlook.
Original Story https://www.cnbc.com/2024/09/09/wall-street-is-turning-less-bullish-on-tech-darling-asml-for-several-reasons.html
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