By Toby Sterling and Nathan Vifflin
AMSTERDAM, July 20 (Reuters) – The global artificial intelligence boom has propelled ASML to the top of Europe's stock market, as soaring demand for AI computer chips flows to the Dutch company that dominates the market for the equipment needed to make them.
After blowout second quarter earnings, investors and analysts are asking a once far-fetched question: could ASML become Europe's first ever trillion-dollar firm?
Key obstacles include doubts over how long Google, Amazon, and other hyperscalers will keep spending heavily on data centres, and whether ASML, its suppliers and customers such as TSMC and Samsung can execute expansion plans.
But after ASML shares spiked 60% this year to push the firm close to a $700 billion valuation, investors and analysts say the trillion-dollar scenario is plausible.
"I think it has a really good chance of being the first company in Europe to hit the trillion mark," said Carolyn Bell, lead portfolio manager for Stonehage Fleming's Global Best Ideas, adding ASML accounted for about 8% of the portfolio.
Analyst upgrades after the second quarter show it's no pipe dream. Barclays, Susquehanna and Bernstein now have 12-month price targets above $2,600 per share – a 49% rise from current levels and the rough threshold for a $1 trillion market cap.
ASML is the only seller of extreme ultraviolet (EUV) lithography tools required to print the minute circuitry of the most advanced logic and memory chips. Investors compare its business to selling picks and shovels during a gold rush.
John Lamb of Capital Group, whose funds hold around 5% of ASML shares worth $35 billion, praised it as a long-term holding for its "unique assets and wide moats".
"The fundamentals for the industry as a whole appear stronger than ever and ASML occupies a critical space," he said.
ASML has overtaken and is now streaking away from other leading European companies Roche, LVMH, Novo Nordisk, AstraZeneca and SAP.
ASML COULD BENEFIT FROM AN 'UPGRADE CYCLE'
Shares trade at 38 times forecast earnings for 2027, according to LSEG data, well above multiples for top ASML customer TSMC, which manufactures the AI chips designed by Nvidia and used by OpenAI, Anthropic and the hyperscaler firms.
ASML investors and analysts said to justify the premium and grow into that valuation several things need to go right, notably continuing hyperscaler demand.
Trent Masters of Alphinity Investment Management, which has about 3% of its portfolio in ASML, warned that "any cooling of this will flow through to ASML's earnings".
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