Morgan Stanley Sees 70% Surge for ASML Shares in Bull Case

Morgan Stanley has highlighted a 70% potential rise for ASML Holding NV shares in its most optimistic scenario. The Dutch semiconductor equipment maker is among the bank's top stock picks, with analysts citing strong demand for artificial intelligence (AI) as a key driver. The firm's base case pegs the stock at €1,400, while the bull case suggests a price of €2,000.

TSMC's recent outlook has reinforced the case for ASML. The semiconductor foundry has signaled increased capital expenditures to meet AI demand, which drives equipment purchases from ASML. TSMC is ASML's largest client, and its stronger-than-expected guidance has lifted investor sentiment.

ASML shares have already risen 25% in 2026, with the stock trading at €1,163 as of January 16. The company's market value surpassed $500 billion, making it only the third European firm to reach that milestone. This growth reflects robust profits and a surge in orders tied to AI and memory chip demand.

Why Did This Happen?

Morgan Stanley analysts point to rising foundry and memory chip capital expenditures as the key drivers for ASML's bullish outlook. They also cite better-than-feared demand from Chinese chipmakers. Higher spending by TSMC and other memory manufacturers is expected to boost demand for ASML's tools, especially EUV lithography systems.

TSMC's announced capital expenditures of between $52 billion and $56 billion for 2026 are a significant factor. The foundry's spending is tied to increased demand for AI processors and high-performance computing, which are core to ASML's product lineup. This spending forecast has triggered a broader rally in semiconductor equipment stocks.

How Did Markets React?

ASML shares rose 1.2% on January 16, building on earlier gains. The company has benefited from a general upward trend in chip equipment stocks, including Lam Research and Applied Materials, which also saw price increases following TSMC's results. This broad-based movement reflects confidence in AI-driven demand.

Analysts at J.P. Morgan and KGI Securities have also raised their price targets for ASML. JPMorgan set its target at $1,518, while KGI raised its target to $1,415. These upgrades signal strong institutional confidence in ASML's long-term prospects.

What Are Analysts Watching Next?

The next key catalyst for ASML could come from TSMC's Technology Symposium in April 2026. Analysts expect TSMC to provide updates on its roadmap for high numerical aperture (NA) EUV technology. If the timeline for implementing this technology is accelerated, it could boost demand for ASML's advanced systems sooner than anticipated.

Market participants are also watching ASML's earnings report, scheduled for January 28. The company has shown strong financial performance in recent quarters, with revenue and earnings both outperforming expectations. Any further upside could reinforce the bullish case for the stock.

Institutional investors have shown mixed activity in ASML shares. Some have reduced their holdings, while others have increased stakes. This varied approach reflects both caution and optimism, depending on short- and long-term outlooks.

ASML's share buyback program has also attracted attention. The company has repurchased €180.8 million worth of shares, signaling management's confidence in the stock's fair value. This action may provide additional support for the stock price, especially if broader market conditions stabilize.

Looking Ahead

The semiconductor equipment sector remains highly sensitive to changes in capex spending. ASML's performance is closely tied to trends in AI, memory, and foundry demand. Any moderation in these areas could slow growth, but current indicators suggest sustained momentum.

The U.S.-Taiwan trade agreement is another potential catalyst. The deal, which includes $500 billion in financing for U.S. operations by Taiwanese semiconductor firms, could boost demand for equipment and support ASML's growth trajectory.

For investors, the key takeaway is the interplay between TSMC's spending and AI demand. These factors are the primary drivers of ASML's growth and valuation. While risks remain, the current environment supports a constructive outlook for the stock.