ASML Stock: Morgan Stanley Names Company Top Semiconductor Pick

TLDR

• Morgan Stanley raised ASML price target to €1,000 from €975 and named it “Top Pick” in European semiconductors
• ASML is benefiting from DRAM technology transitions, particularly the shift to 1c nodes requiring 5-6 EUV layers
• Morgan Stanley expects 52.3% gross margin in 2026 despite anticipated DUV slowdown
• Analyst forecasts 15% China demand drop, less severe than management’s 20% guidance
• Stock trades around $1,003 with market cap of $389 billion, up roughly 1.5% on the session

ASML shares climbed 2.7% in Amsterdam on Wednesday after Morgan Stanley upgraded the Dutch chip equipment maker to “Top Pick” in European semiconductors. The bank raised its price target to €1,000 from €975.

ASML Holding N.V., ASML

Analyst Lee Simpson cited strengthening demand across memory and logic sectors. The upgrade follows more than a year of uncertainty tied to geopolitics and uneven spending patterns.

The stock is trading around $1,003 per share in New York, up roughly 1.5% on the session. ASML’s market capitalization sits at approximately $389 billion.

Morgan Stanley says ASML is “riding the DRAM wave” into financial year 2026. The company continues to see solid demand from DRAM technology transitions.

The shift to 1c nodes from 1a and 1b is particularly important. Each shift results in more EUV layers, with a total of 5-6 layers anticipated at 1c.

This increases lithography intensity and underlines ongoing demand momentum in DRAM for EUV systems. Recent discussions with ASML management suggest stronger demand visibility from Samsung and SK Hynix.

Samsung may not have placed all of its orders for FY26 yet. This presents potential upside to current forecasts.

Margin Outlook Remains Strong

Margins are expected to stay resilient despite an anticipated slowdown in DUV systems next year. Higher EUV sales and improved Installed Base Management profitability should offset the DUV weakness.

Simpson models a 52.3% gross margin in 2026. That’s 40 basis points lower year-on-year, but he calls it “testament to margin control in a difficult DUV year.”

The analyst forecasts a 15% drop in China demand. This is less severe than the 20% decline management has guided toward.

Simpson sees upside risks from DRAM and foundry spending related to AI infrastructure. Nvidia’s recent commentary on “off the chart” Blackwell demand supports this view.

AI Infrastructure Driving Tool Demand

The Nvidia comments are seen as a positive for ASML’s 2026-27 tool cycles. Leading-edge capacity expansions are being pulled forward to meet AI demand.

Morgan Stanley argues that increased 3nm buildouts at TSMC may require more EUV orders. These orders were not part of the Q3 order book.

The bank reiterated its Overweight rating on ASML. Recent share price weakness offers an “attractive entry point,” according to the analysts.

Morgan Stanley expects consensus earnings revisions to follow. The market is shifting focus to 2026-27 fundamentals.

ASML trades at about 36 times trailing earnings. This is in line with its premium semiconductor-equipment multiple.

The stock is quoted near $1,003.22 in New York. The intraday range runs from about $974 to $1,007.

In mid-October, ASML reported third-quarter 2025 results with net sales of about €7.5 billion. Gross margin came in slightly above 51%.

Management reiterated longer-term revenue and margin ambitions. However, they cautioned that 2026 growth could be more moderate.

Consensus 12-month price targets cluster just under $1,000. Recent bullish calls from Wells Fargo and JPMorgan point to potential upside in the low-$1,100s.

The stock carries predominantly Buy/Overweight ratings. This reflects ASML’s strategic position in leading-edge EUV and DUV tools despite cyclical concerns for 2026.

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