Amid a rally fueled by the surge in artificial intelligence (AI) expectations, ASML Holding NV (AS:ASML) (NASDAQ:ASML), the semiconductor company, has emerged as a significant player, with ASML stock witnessing a notable stock rally.
ASML’s shares have surged more than 34% this year, a testament to the positive outlook for the company. This outlook is driven by the growing demand for its products and technologies within the AI landscape, a trend that is expected to continue.
This surge in AI-related companies has not only bolstered ASML’s position but also provided a tailwind for the entire industry.
In a note to clients this week, analysts at Goldman Sachs said its 2025 Bull/Bear scenario analysis suggests a favorable risk/reward skew driven by AI tailwinds.
Following ASML’s recent strong share price performance, many investors have focused on the extent to which risk-reward levels remain favorable. Analysts at Goldman Sachs said that based on their investor conversations and with 2024 revenues largely locked in by the current backlog, the debate has shifted to ASML’s 2025 results.
“In particular, our discussions have centered on the scope for a sharper-than-expected inflection in 2025 EUV shipments (e.g., driven by AI-related tailwinds), the degree of sustainability of currently very strong levels of China DUV spending, and the magnitude of the Installed Base Management revenue inflection,” explained the investment bank.
They added, “We continue to expect ASML to benefit from AI tailwinds and China demand strength in the coming quarters, following constructive datapoints in both of these markets.”
The firm’s base case view is that 2025 China spending will remain significantly stronger than the 2022 level, given the country’s more aggressive ambitions in semis self-sufficiency over the last one to two years. However, they see it declining moderately compared to the 2023 level, as China’s exceptionally strong spending growth rate makes a difficult comparison.
“While announcements around the adoption of High NA remain a key long-term catalyst for the stock, in our view, we believe that scope for upside/downside surprise to 2025 group sales from High NA is relatively less significant than from EUV/DUV,” stated Goldman Sachs.
The firm reiterated a Buy rating on the stock with a price target of €1,070 per share. It sees ASML’s 1Q results on April 17 as “the next key catalyst for the shares,” and they believe investors will focus on quarterly order intake, as well as commentary around the demand environment in the leading-edge Logic/Foundry space.
Furthermore, the investment bank continues to see upside risk to its base case estimates, with an “undemanding future cadence of quarterly order intake required to hit the midpoint of its 2025 sales guidance.”
