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.

Analysts say the trillion-dollar scenario is plausible, with Barclays, Susquehanna, and Bernstein now having 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. According to Carolyn Bell, lead portfolio manager for Stonehage Fleming's Global Best Ideas, 'I think it has a really good chance of being the first company in Europe to hit the trillion mark,' adding ASML accounted for about 8% of the portfolio.

Investors compare ASML's 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.

However, analysts also warn that several things need to go right for ASML to justify the premium and grow into that valuation. Trent Masters of Alphinity Investment Management said 'any cooling of this will flow through to ASML's earnings.' Other threats include ASML's ability to manage its supply chain and geopolitical risks.

Despite these challenges, analysts remain optimistic about ASML's prospects. Kinngai Chan of Summit Insights Group said AI memory chip makers such as SK Hynix, Samsung, and Micron are shifting production away from processes that use ASML's older DUV tools toward new and pricier EUV tools, a profitable 'upgrade cycle' that could benefit ASML.

The possibility that chip demand accelerates also supports ASML's growth prospects. The new Terafab plant planned by Elon Musk in Texas to supply SpaceX and Tesla represents a new source of revenue for ASML.

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