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Being the first link in the supply chain has its benefits.
So it’s no surprise that ASML became Europe’s most valuable company on Wednesday, surpassing the record previously held by Novo Nordisk.
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Lith or Lithout you
In case anyone needs a refresher on the AI ​​supply chain, ASML has a virtual monopoly on the extreme ultraviolet (EUV) lithography machines used by TSMC and other chip factories to make the semiconductors (often designed by Nvidia) that AI companies like OpenAI and Anthropic use to train and run their models. Being on the starting line of the great AI race has sent ASML’s share price up almost 50% so far this year. But that’s actually underperforms its major peers (the sector-tracking Invesco PHLX Semiconductor ETF, for example, has gained 95%), and its $668 billion market cap, while the largest ever in Europe, is below the $1 trillion threshold that’s practically boring for major supply chain players.
However, analysts at JPMorgan and Morgan Stanley posted fairly similar notes on Wednesday, arguing that the stock still has plenty of room to grow, prompting the rally that minted the new record:
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Analysts at both banks argued that it will likely be easier (and cheaper) than anticipated for ASML to increase production capacity to meet high demand in the coming years; Both notes projected that ASML could ship up to 90 EUV machines in 2027, up from the 80 machines the company recently projected.
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Analysts at both banks subsequently raised their price targets for ASML shares. The endorsements come just weeks after similar action by UBS analysts, who rated the stock as one of the “best picks.”
initial advantage: Whether ASML can maintain its monopoly status is a hotly debated question. Huawei, for example, has recently begun promoting a possible solution to the ASML team; Substrate, a San Francisco-based startup backed by Peter Thiel, has raised $100 million to try to crack the code on lithography, and Nikon recently burst into the market with a low-end product. When asked by TechCrunch last month about potential competitors, ASML CEO Christophe Fouquet said he didn’t see his company’s considerable moat drying up anytime soon: “Wanting to have it and having it, it’s still a big difference… When you start from scratch, the challenge is huge.”
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