ASML Receives Major Endorsement as Morgan Stanley Sets €1,000 Price Target

Morgan Stanley has positioned Dutch semiconductor equipment manufacturer ASML as its premier investment choice among European chip stocks, simultaneously elevating its price target to €1,000. This significant vote of confidence stems from a confluence of factors, including a projected surge in demand for advanced memory chips and the company's demonstrated resilience in profitability.

A primary driver behind the optimistic outlook is an impending technological transition within the DRAM memory sector. According to the firm's analysis, major producers like Samsung and SK Hynix are embarking on a substantial leap in their manufacturing processes. They are shifting from older 1a and 1b production nodes to more advanced 1/1c nodes.

This industry-wide upgrade plays directly into ASML's strengths. The newer 1c nodes are anticipated to require between five and six EUV (Extreme Ultraviolet) layers. Each of these layers depends on ASML's highly complex lithography systems. Morgan Stanley's researchers suggest that Samsung might place supplementary orders for ASML's machinery for the 2026 fiscal year to support this expansion.

Profitability Demonstrates Resilience

Even as the company navigates a softer market for its DUV (Deep Ultraviolet) systems, its financial health appears robust. Morgan Stanley forecasts a gross margin of 52.3% for 2026. This projection indicates only a slight contraction of 40 basis points compared to the previous year.

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This margin stability is attributed to a favorable shift in the company's product and service mix. Increased sales of the more advanced EUV systems, coupled with stronger profitability from the Installed Base Management service division, are expected to counterbalance the current weakness in DUV sales. This dynamic underscores the durability of ASML's business model during periods of sector-specific headwinds.

China Exposure and AI Demand Provide Mixed Picture

The assessment of risks related to the Chinese market offers a nuanced perspective. Morgan Stanley's forecast is somewhat less severe than the guidance provided by ASML's own management. While the company anticipates a 20% decline in demand from China, the analysts' models incorporate a more moderate 15% reduction.

Counterbalancing this concern is the explosive growth in artificial intelligence. The soaring demand for AI chips, exemplified by what Nvidia has described as "off the chart" orders for its Blackwell processors, is accelerating the expansion of global production capacity. A key development is TSMC's ramped-up 3nm manufacturing, which could trigger new orders for ASML's EUV equipment that have not yet been factored into current market expectations.