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Investing.com -- ASML shares rose on Wednesday after Morgan Stanley raised its price target and named the company its “Top Pick” in European semiconductors, pointing to strengthening demand across memory and logic and firming margin trends heading into 2026.
The bank raised its target to €1,000 from €975, arguing that a recovery cycle is now underway following more than a year of uncertainty tied to geopolitics and uneven spending patterns.
Shares in the Dutch chip-gear maker rose 2.7% in Amsterdam.
Analyst Lee Simpson says ASML is “riding the DRAM wave into a bright” financial year 2026 (FY26), driven by technology transitions at major memory producers.
“ASML continues to experience solid demand from DRAM technology transitions. In particular, we see this in the shift to 1 /1c from 1a and 1b nodes,” he wrote.
“Each shift will result in a lift in EUV layers, for example a total of 5-6 layers at 1c is anticipated, and as such gives a modest upward trend to litho intensity and underlines ongoing demand momentum in DRAM for EUV systems,” the analyst explained.
Morgan Stanley said its recent discussions with ASML management suggest stronger demand visibility from Samsung and SK Hynix, noting that the former “may not yet have placed all of its orders for FY26.”
Margins are expected to remain resilient despite an anticipated slowdown in DUV systems next year. Simpson points to higher EUV sales, improved Installed Base Management profitability, and a richer mix across new tool cycles.
The analyst and his team model a 52.3% gross margin in 2026, 40 basis points lower year-on-year, calling it “testament to margin control in a difficult DUV year.”
Simpson forecasts a 15% drop in China demand, less severe than the 20% rate management has guided to, and sees upside risks from DRAM and foundry spending related to AI infrastructure.
Nvidia’s recent commentary on “off the chart” Blackwell demand is seen as a positive read-through for ASML’s 2026–27 tool cycles, particularly in EUV, as leading-edge capacity expansions are pulled forward.
Morgan Stanley argues that increased 3nm buildouts at TSMC may require more EUV orders that were “not part of the Q3 order book.”
The bank reiterated its Overweight rating on ASML and says recent share price weakness offers an “attractive entry point.” The analysts expect consensus earnings revisions to follow as the market shifts focus to 2026–27.