Key Updates
ASML shares have sold off sharply, falling 7.80% since the last report to $1,630.00 and extending the 1-month decline to 9.17%, as momentum from the July 15 guidance upgrade gives way to near-term profit-taking. Despite the pullback, the year-to-date gain remains robust at 52.36%, and the fundamental drivers—unrelenting AI demand, raised full-year guidance to €43–45 billion, and planned 30% EUV capacity increases in 2027 and 2028—are unchanged. The investment thesis stays intact, though the speed of the retracement highlights heightened volatility and execution risk at elevated valuations.
Current Trend
The stock is in a short-term correction phase after a parabolic year-to-date rally. Price action shows a decisive break below the $1,765–$1,807 support zone established in prior weeks, with the 1-day drop of 7.23% indicating accelerated selling pressure. The 6-month performance of +12.06% and YTD return of +52.36% confirm the primary uptrend remains valid on an intermediate horizon, but the 1-month decline of 9.17% signals that near-term sentiment has shifted cautious. Resistance is now redefined near the prior $1,765–$1,807 consolidation floor, while the $1,630 level represents immediate support to hold.
Investment Thesis
The core thesis rests on ASML's monopoly in advanced lithography and a multi-year AI-driven capital expenditure cycle. Company-specific factors include the raised 2026 revenue guidance to €43–45 billion, gross margin expansion to 54–56%, and a projected 75% surge in memory revenue. Market-wide factors include hyperscaler demand for AI infrastructure and TSMC/Samsung capacity expansion. The July 15 guidance raise and Morningstar's fair value upgrade to EUR 1,800 reinforced conviction, while the July 20 Reuters article on trillion-dollar potential underscores institutional enthusiasm. The thesis assumes sustained order flow and successful execution of the 2027–2028 capacity ramp.
Thesis Status
The thesis remains on track. None of the provided news flow contradicts the bullish fundamental narrative; the sell-off appears technically driven rather than fundamentally driven. The prior report flagged a -2.14% retracement and a return toward support; the current -7.80% move extends that correction but does not invalidate the demand outlook. Risk has increased marginally because the break below the $1,765 level may trigger further technical selling and because valuation sensitivity rises after a 52% YTD advance.
Key Drivers
- Guidance Upgrade: ASML raised full-year sales guidance to €43–45 billion and gross margin to 54–56%, citing unrelenting AI demand. Source
- Capacity Expansion: The company is weighing 30% increases in EUV output in 2027 and again in 2028, with Low-NA EUV capacity potentially reaching 85–110 systems. Source
- Q2 Earnings Beat: Second-quarter revenue of €9.33 billion and net profit of €2.92 billion exceeded expectations, with Q3 sales guided to €11–12 billion. Source
- Valuation Re-rating: Morningstar lifted its fair value estimate to EUR 1,800 and projected 2028 revenue of approximately €70 billion and 2030 sales exceeding €80 billion. Source
- Trillion-Dollar Speculation: A July 20 Reuters article highlighted ASML's market value approaching $700 billion and fund managers building significant positions, though it also noted uncertainty over sustained hyperscaler capex. Source
Technical Analysis
The $1,630 print marks a critical juncture. The stock has violated the $1,765–$1,807 support band that contained price action since mid-July, converting it into near-term resistance. The 7.23% single-day decline on elevated momentum suggests forced liquidation or systematic selling rather than orderly consolidation. On a positive note, the YTD trend is still intact and the 6-month return of +12.06% suggests underlying accumulation. A sustained hold above $1,600–$1,630 is necessary to prevent a deeper retracement toward the $1,500 psychological level. Recovery back above $1,765 would be required to neutralize the bearish near-term structure.
Bull Case
- Guidance and margin expansion: ASML raised 2026 sales guidance to €43–45 billion and gross margin to 54–56%, reflecting pricing power and order visibility. Source
- Multi-year capacity roadmap: Planned 30% EUV output increases in 2027 and 2028 underpin a 28% sales CAGR through 2028 and potential €70+ billion revenue by 2028. Source
- AI demand durability: Unrelenting demand from hyperscalers and memory customers is driving a 75% jump in memory revenue this year. Source
- Fundamental valuation re-rating: Morningstar raised its fair value to EUR 1,800, implying significant upside from current levels under base-case assumptions. Source
- Institutional positioning: Fund managers are allocating heavily, with one strategy holding approximately 8% in ASML, reflecting confidence in the long-term AI thesis. Source
Bear Case
- Hyperscaler capex uncertainty: The Reuters article explicitly flags uncertainty over sustained capital expenditure from Google and Amazon, which could derail order growth if AI infrastructure spending moderates. Source
- Execution and supply chain risk: Rapid capacity expansion plans for 2027–2028 carry execution risks across ASML's supply chain and key customers including TSMC and Samsung. Source
- Bear scenario downside: Morningstar's bear case models stalled growth and capacity digestion in 2029–30, cutting 2029 EPS to EUR 57 and resetting valuation to the EUR 1,100–1,400 range. Source
- Technical breakdown: The 7.80% drop since the last report and break below the $1,765 support band open the door to further technical selling and volatility. Source
- Memory revenue cyclicality: While memory revenue is projected to surge 75% this year, the concentration exposes ASML to the volatile memory capex cycle if supply-demand dynamics shift. Source