Key Takeaways
- Dutch firm ASML’s stock has gained in 2026 as a critical AI picks-and-shovels play.
- Concerns about the impact on ASML from advancements in China’s lithography technology are overstated in the near term, analysts say.
- Morningstar raised its long-term forecasts and fair value estimates for the firm.
Dutch semiconductor equipment firm ASML ASML has emerged as one of the top-performing AI infrastructure stocks so far in 2026, shaking off a July correction to outperform its heavyweight peers and reinforce its position as a crucial AI picks-and-shovels play.
Shares in ASML—Europe’s most valuable company and the only one globally to produce extreme ultraviolet lithography machines used in the most advanced semiconductors—are up 55% since the start of the year. That beats Nvidia’s NVDA 18% gain and TSMC’s 2330 50% rise in local currency terms while falling short of the more dramatic gains of volatile memory chip stocks like Samsung 005930 and SK Hynix 000660.
ASML has been an outlier among hardware stocks during earnings season, as many names have fallen despite posting strong results. The stock rose 7% after the company posted stronger-than-expected results and raised its full-year guidance for the second time this year. Nevertheless, ASML shares were hindered by a broader July selloff in AI hardware amid concerns about AI spending and valuations. Then, in late July, reports that a Chinese state-owned company had begun manufacturing immersion deep-ultraviolet lithography machines sent ASML shares tumbling 13% over several days as investors questioned its continued market dominance.
Is China a Threat to ASML’s Lithography Dominance?
ASML has long held a near-monopoly over lithography machines, which are essential for the most sophisticated microchips. Reports that China may be nearing the commercialization of DUV lithography machines left investors pondering ASML’s long-term growth prospects and its key Chinese revenue stream.
Julian Evans-Pritchard, head of China economics at Capital Economics, says those concerns appear overdone: “Although it is a big milestone, I don’t think it’s going to make a huge difference to China’s compute capacity over the near term.” Capital Economics estimates that the Chinese firm will deliver five DUV lithography machines this year and another 20 in 2027, while China currently buys around 100 such machines from ASML annually. “At the margins, it marks an increase in domestic supply. But for the foreseeable future, China’s going to remain heavily dependent on what it can still get from ASML,” Evans-Pritchard says.
Strong Orders Boost ASML’s Growth Outlook
Indeed, ASML shares have since been trending upwards, extending broader gains over the past 18 months, as investors weigh improved forecasts for the firm.
ASML said last month that order intake remained “extremely strong” in the first half of the year, as customers from TSMC and Micron MU to Samsung and SK Hynix continue to ramp up chip production. Based on that momentum, the company said it now aims to add 30% to its 2026 low NA EUV capacity and 30% to its 2026 DUV immersion capacity, with similar increases likely in the coming years.
As a result, Morningstar analysts raised their long-term forecasts for the firm, noting that the high-demand environment ”has become more real in the second quarter,” with customers doubling down on future orders. They also raised their fair value estimate for the stock to EUR 1,800 per share from EUR 1,200.
“While our previous 2030 revenue forecast was anchored to the top end of ASML’s long-term guidance of EUR 60 billion, this number looks irrelevant now, as we estimate ASML could deliver close to EUR 70 billion in revenue and EUR 69 billion in EPS already in 2028, even without fully utilizing its capacity,” says Morningstar senior equity analyst Javier Correonero.
In the meantime, analysts note that the sophistication of ASML’s machines, alongside the costly and complex process many chip firms have undertaken to design their fabrication plants around the Dutch machines, makes it highly unlikely that ASML will be unseated from its key role in the AI supply chain anytime soon. “No competitor has yet matched ASML’s technological leadership, and we don’t see this happening in the next 10 years,” Correonero says.
