ASML’s Price Target Cut By BofA Due To Lower High NA Machine Demand
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Bank of America cut lithography equipment manufacturer ASML’s share price today on the back of slowing demand for the firm’s latest high NA extreme ultraviolet (EUV) lithography machines. ASML is the world’s leading chip equipment manufacturer, and BofA reduced the firm’s share price target to €759 from an earlier €795, as it also reduced ASML’s earnings per share estimates for 2026 and 2027.
BofA Cuts ASML Share Price Target As It Forecasts Lower High-End Lithography Equipment Demand
BofA’s ASML share price target reduction follows comments from an Intel executive last month, which hinted at the decreasing importance of lithography in leading-edge chip fabrication. Lithography is the first stage in chip fabrication, where chip manufacturers transfer designs to wafers to produce billions of transistors. It is also the most important step, as the resolution of the lithography machines determines the circuit size, which will eventually be printed.
The latest chip manufacturing technologies rely on advanced transistor designs, which seek to add more layers vertically instead of horizontally. The updated design laws reduce the importance of resolution in chip manufacturing, and for ASML, this means that the firm’s latest high NA EUV equipment might not be as crucial for leading-edge chip manufacturing technologies as the previous EUV machines were to 7-nanometer and lower nodes.
BofA appears to agree with the lower importance of high NA EUV machines as it reduces ASML’s share price target on the back of several assumptions. These include broader market uncertainty, lower high NA demand and production issues at Intel.
According to BofA, ASML’s forward enterprise value to operating income ratio of 19.6 is still attractive despite being lower than the historical ratio of 22. The ratio influences the bank’s stock rating, as it stuck with a ‘Buy’ in its latest note despite cutting the share price to €759 from €795. The share price target reduction is based on lower forward earnings estimates as BofA now expects ASML to earn as much as 5% in lower EPS.
The lower EPS estimates are based on slower demand for the latest high NA EUV scanners, Samsung’s struggle to get its memory products approved by NVIDIA, production woes at Intel, which is yet to kick off the mass production of its latest 18A chip manufacturing technology and the lingering threat of additional US chip manufacturing equipment restrictions on China.
One particular factor which has influenced BofA’s high NA bearishness is memory chip manufacturer SK hynix relying on 3D memory chips that rely on vertical designs instead of horizontal ones. BofA also expects ASML to ship four high NA EUV scanners in 2026 for a 50% drop.
However, bullishness about the global AI chip market leads the bank to remain positive about the long-term demand for ASML’s products. BofA believes that the demand for AI chips could reach $795 billion by 2030 and increase the demand for lithography equipment, especially since AI chips are generally manufactured with the latest technologies due to stringent power and performance requirements.
