ASML Can Hit New Highs, But It Won’t Be Easy: Here’s Why
ASML’s (NASDAQ: ASML) stock price could hit new highs because it is well-positioned for the AI boom, and the chart action is bullish. Up 40% since early September, the market for this semiconductor equipment maker is rallying strongly amid the AI news cycle and analysts' sentiment trends, which are driving it toward a new all-time high. Based on the stock price action, the new high could be reached before year-end and mark the start of a much larger movement.
The market for ASML stock could advance by as much as $300, or 30%, from the critical resistance point relatively quickly. However, investors should be aware of some stumbling blocks that will keep volatility high in the coming months.
ASML: Backlog Grows as EUV Lithography Gains Traction
ASML had a solid quarter despite its revenue falling short of analysts' consensus. The company’s net revenue grew by 0.7%, driven by AI and broadening demand from end-market manufacturers, including the DRAM market. DRAM is critical, as it includes high-bandwidth or HBM solutions necessary for AI and will be in high demand over the long term.
Moving down the report, the margin news is better, including improved operating quality and leveraged bottom-line results. The GAAP EPS grew by nearly 7.5%, including the impact of share repurchases, bolstering the already stable capital return outlook.
The guidance is favorable, although it also provides a stumbling block for the market. The company forecasts improving demand for its EUV products and 2026 revenue at least flat compared to 2025.
The stumbling block is that sales in China are predicted to slow, and will be a headwind for growth. The risk is that the headwind, with China representing approximately 42% of net sales, will be insurmountable despite improving demand in all other markets.
Regardless, ASML’s dividend announcement. The company issued its interim dividend announcement alongside its Q3 earnings report and is on track for a 10th consecutive year of increased payments. The company’s buybacks are also expected to continue, and they are significant, having reduced the count by an average of 1.5% in Q3.
ASML Analysts and Institutional Trends Are At Odds, Driving Volatility
ASML’s 40% stock price increase is partly due to a rapid surge in analysts' coverage, which attracted new money to the market. The data tracked by MarketBeat shows coverage increased by 50% over the preceding four months, reaching a record high of 21, providing a solid support base for this market. The revision trend is a tailwind for the price action, but there is a caveat—the institutions.
The institutions are the largest group of traders in the market, and their interest in ASML is tepid. The data shows they owned only 26% of the stock, and the group sold on balance in Q3, leading up to the report.
The price action in ASML stock is favorable to investors following the results, but it reflects the inherent risks. Although the market is advancing, resistance remains at critical levels that may cap gains until later in the year. Catalysts that might move this market include improved relations with China, which may not emerge soon.
Elevated trading volume since late 2024 and the convergence of the MACD momentum indicator with its latest highs are factors favoring a higher share price.
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