Shares of industry-leading lithography specialist, ASML (ASML 2.35%), are up 9% as of noon Friday. The catalyst for this surge stems from Aletheia Capital issuing a rare stock rating reversal from "sell" to "buy," alongside a doubling of its price target for the stock from $750 to $1,500. Compared to ASML's current trading level, this new price target represents 30% upside.
NASDAQ: ASML
Key Data Points
ASML: Powering the Magnificent 7
ASML holds a dominant share of the deep ultraviolet (DUV) lithography industry and a quasi-monopoly in the bleeding-edge extreme ultraviolet (EUV) lithography niche, making it one of the most important companies in the world today -- particularly in the semiconductor chain. Lithography is the near-magic process of etching infinitesimal patterns onto silicon wafers to be used in the world's most advanced semiconductor chips -- and ASML's equipment leads the way.
Image source: ASML.
While the company may not be a household name, I'd argue that it certainly passes the snap test. If these products disappeared overnight, the Magnificent Seven would be immediately hindered, and many of its AI ambitions would become unachievable, or at the very least, delayed. ASML's importance to the Magnificent Seven and its interconnectedness within the broader semiconductor industry rhymes with Aletheia Capital's reasoning for raising its outlook on the stock.
Aletheia notes that Taiwan Semiconductor Manufacturing Company's plans to expand its manufacturing capacity by 40% to 50% in 2027 will be a key catalyst for ASML, as the company will be one of the leading suppliers of this growth. Furthermore, the investment firm believes EUV growth will accelerate to 60% to 70% by 2027 as ASML capitalizes on the AI boom.
While ASML trades at a lofty 38 times forward earnings, its lithography dominance and growth potential seem to outweigh this slight premium.
