Investing.com — The iShares Semiconductor ETF (NASDAQ: SOXX) is up 65% YTD, while the global SPIE average is at 50-70%. Against this backdrop, UBS analysts have identified a stock that has been overlooked and which makes for an attractive investment in the unusually elevated market environment.
UBS believes that ASML Holding () () is the most attractive stock to buy now when the markets are at all-time highs. Specifically, the analysts cite three reasons that justify the recommendation: “1) Capacity remains above demand; 2) Memory litho share keeps increasing and 3) High NA story is not over yet.”
Furthermore, the firm also sees a catalyst path ahead for the company.
ASML is rated Buy with a raised price target of €1,900 at UBS.
ASML is among the most strategically important companies in the semiconductor landscape, as it effectively monopolises production of the advanced lithography machines used to manufacture cutting-edge chips.
Selling Extreme Ultraviolet [EUV] lithography systems, High NA EUV systems, and DUV systems is ASML’s core business. ASML’s customers include TSMC (NYSE: TSM), Samsung (KRX: 005930), Intel (NASDAQ: INTC), and memory makers like SK Hynix (KRX: 000660).
AMSL sits at the centre of the AI boom, sovereign semiconductor investment, and the global fab expansion cycle and essentially occupies a tollbooth position as modern AI chip companies like Nvidia (NASDAQ: NVDA) depend on its tools.
UBS analysts see stronger revenue growth in memory and advanced logic, which will influence the EUV and DUV business ex-China. They now anticipate that EUV revenues will grow 37% YoY in 2027 and 10% YoY in 2028E. This marks a big change from the previous estimates of 26% and -1% revenue growth respectively.
Discussing the changes by end market, UBS notes that the outlook for memory is constructive over the next two years. This creates a beneficial situation for the supply chain, and especially for players leveraged to rising WFE intensity.
The firm now projects +35% YoY growth in 2027 and +10% YoY in 2028E, which is above the previous estimates of +35% and -10% respectively. This is driven by anticipation that the memory cycle will likely extend through 2028E on the prevailing constraints.
Firm analysts also expect the 1d ramp-up in 2027/2028 will be more lithography-intensive.
Foundry/Logic represents 62% of product sales in 2026E. UBS is now forecasting growth of +34% YoY in 2027E and +18% YoY in 2028E. This is above the prior estimates of +16% and +17%, respectively.
The analysts attributed these adjustments to improvements in foundry operations at Intel and Samsung, and increased investment in 2028E driven by TSMC capacity constraints anticipated in 2027.
UBS thinks that the market has overlooked enhanced throughput across various low NA models, coupled with the potential for system upgrades and shorter cycle times enabled by “fast” shipments.
The analysts say that while ASML has communicated a capacity of over 80 EUV units in 2027, the firm’s analysis suggests the actual theoretical maximum capacity could exceed 100 units. This excludes additional contributions from fast shipments.
While the demand growth is projected to be 25-30% YoY in 2027, the production of 100 EUV units at present represents a 65% YoY increase in leading edge capacity.
The benefits of the High NA story are too big to ignore, says UBS, and adoption will likely occur over the next 2-3 years. The key benefits include: “20–40% cost savings on critical layers co double/triple patterning and process simplification, and (2) meaningful capacity unlock by replacing low-throughput multi-patterning steps (e.g., ALD ~30 wph).”
The firm’s analysis suggests High NA can deliver >100% throughput gains compared to most alternatives (~80% vs. LELE). This only reinforces the long-term case for adoption.