UBS has upgraded ASML Holding NV to a "Buy" rating, raising its price target to €750 from €660. The upgrade is predicated on expectations of ASML re-emerging as a "quality compounder" with significant EPS growth driven by advanced lithography technologies and a strategic turning point anticipated in 2027.

Market Snapshot: ASML Upgrade Signals Optimism in Semiconductor Sector

On Thursday, September 5, 2025, UBS upgraded ASML Holding NV (AMS:ASML), a critical supplier to the semiconductor sector, from a Neutral to a Buy rating. The financial institution also raised its price target for ASML to €750 from €660, implying a 19% upside from the stock's last close at €647.60. This upgrade follows a 20% decline in ASML shares over the preceding year, a period characterized by concerns over lithography intensity and uncertainties surrounding the Chinese market.

Driving Factors Behind the Upgrade

UBS analysts posit that ASML is poised to re-emerge as a "quality compounder," projecting a robust 20% Earnings Per Share (EPS) Compound Annual Growth Rate (CAGR) from 2026 to 2030. A pivotal turning point is anticipated in 2027, primarily driven by the production ramp of TSMC’s A14 logic node. This development is expected to significantly increase extreme ultraviolet (EUV) exposures, from an average of 19-22 layers to 20-24 layers.

Further contributing to this positive outlook is the expected fading of uncertainty surrounding key customers Intel and Samsung. The report also highlights High-NA EUV tools as a substantial growth driver, with meaningful adoption forecasted from 2027-2028. These advanced systems are estimated to represent between 15% and 20% of ASML’s total sales by the end of the decade.

Valuation and Strategic Positioning

From a valuation perspective, ASML currently trades at approximately 24 times its 2027 earnings. This is notably below its 10-year average P/E ratio of 28 times, suggesting potential undervaluation. UBS has also upwardly revised its post-2027 EPS forecasts by 4% to 7%, reflecting increased confidence in the adoption of High-NA technology, which contributed to the higher price target. The company's reported P/E ratio stands at 37.53, with a market capitalization of €142.6 billion and a debt-to-equity ratio of 0.32.

Despite the long product lead times and deep integration into customers' long-term roadmaps, ASML faces ongoing risks, particularly concerning its revenue from China. Revenues from this region are projected to decline by 12% in the current year and an additional 20% in 2026. However, UBS believes this overhang is becoming more manageable, with sales from China expected to normalize to around 15% to 20% of total sales from 2028 onwards.

ASML is strategically positioned at the forefront of the value chain, supplying crucial tools for AI chip production. This positions the company to benefit significantly from the escalating demand for Artificial Intelligence as EUV lithography is critical for advanced 3nm+ AI chips.

Expert Insights

UBS analyst Francois-Xavier Bouvignies commented on the market's long-term view:

Given ASML's long product lead times and high integration into customers' long-term roadmaps, the market is likely to look past a relatively weak 2026E to 2027E period.

Catalysts and Outlook

Several nearer-term catalysts are expected to provide further clarity and potentially stimulate ASML’s stock performance. These include anticipated insights on incremental EUV exposures and High-NA adoption at industry events scheduled for early 2026, commentary from ASML in upcoming quarterly results, the launch of a new low-NA EUV model in the second half of 2026, and potential new customer announcements from Intel and Samsung.

The UBS upgrade signals a renewed positive outlook for ASML and, by extension, the broader semiconductor equipment sector. It underscores the foundational role of EUV and High-NA EUV technologies in future technological advancements, reinforcing investor confidence in the critical infrastructure supporting global chip production. Despite a recent modest decline in stock price on September 2, 2025, the consensus rating for ASML remains a "Moderate Buy," reflecting sustained investor confidence in its long-term potential.