Shares of ASML, the Netherlands-based maker of advanced chip-manufacturing equipment, swung sharply after the company released fourth-quarter results, underscoring growing tension between lofty market expectations and questions over production capacity.
On the day of the results, the stock climbed to fresh highs before reversing course to finish the session down 2 percent. That volatile trading followed a sustained rally that has pushed ASML to the top of European market capitalisation rankings. Year-to-date, the stock has risen about 34 percent, and analysts now value the company at roughly 467 billion euros.
Investors are weighing the firm’s prospects against a valuation that sits well above many chip-related names. ASML shares are trading at about 42 times estimated 2026 earnings, compared with a cited 25 times multiple for Nvidia, a key end-market driver for some of ASML’s customers. Management has provided a wide range for sales growth this year, from 4 percent at the low end up to 19 percent at the high end, a span that feeds uncertainty about near-term performance.
Order backlog and production lead times
ASML’s backlog stood at 38.8 billion euros at the time of the results. Observers highlight that the company’s extreme ultraviolet, or EUV, lithography systems are complex and time-consuming to build - often requiring around a year for completion - which amplifies the challenge of meeting elevated demand quickly.
The company is the sole supplier of EUV machines, which are critical for producing the advanced circuitry used in leading-edge processors. This exclusivity underpins bullish views on long-term structural demand, yet it also concentrates focus on ASML’s ability to scale production without becoming a constraint for customers expanding capacity.
Customer plans and growth expectations
Supporters of the stock point to aggressive capacity expansion plans by several large chipmakers. Taiwan Semiconductor Manufacturing Co is projected to undertake major expansions in 2026, with additional growth in 2027 and 2028. Memory manufacturers including Samsung, SK Hynix and Micron have signalled AI-driven investment plans that would require more lithography tools.
Gerrit Smit, lead portfolio manager of the Stonehage Fleming Global Best Ideas Equity fund, said he does not rely on multiple expansion to generate returns. He outlined an expectation that shipments could increase about 15 percent per year through 2030, noting that unit growth, alongside operational efficiencies and higher capacity, would support margin improvement. Smit observed: "I’m not going to say they can charge anything for those machines, but that 15% growth is just unit growth. Along with that, they will gain in their own operational efficiencies with more capacity, and get better margins."
Valuation and investor positioning
Some market participants warn that much of the positive outlook may already be reflected in the share price. Han Dieperink, chief investment officer at Aureus, said: "Much of the good news is then already priced in." Aureus recently cut its ASML position by half to 45,000 shares but still maintains an overweight stance. Michael Roeg, an analyst at Degroof Petercam, suggested that upgrades across the sector could slow, prompting fresh scrutiny of steep multiples and the associated risk-reward calculus.
For investors seeking exposure to broader chip demand without direct exposure to individual chipmakers, ASML and other equipment suppliers are seen as one route. Names cited alongside ASML as playing that role include Applied Materials, Lam Research, KLA Corp and Tokyo Electron.
Capacity assurances and analyst views
ASML’s chief executive, Christophe Fouquet, told analysts that the company would not become a "bottleneck" for the industry. JPMorgan analyst Sandeep Deshpande commented that ASML’s valuation appears reasonable on the path to 2027, and that he does not see a capacity issue. Nonetheless, other analysts flag that delays at equipment suppliers can push out customer facility timelines, as seen in recent developments in the United States.
Jos Versteeg of InsingerGilissen warned that missed deliveries could delay planned fabs by major customers such as TSMC and Samsung, yet he continues to recommend the stock for its long-term growth prospects. He acknowledged the price, saying: "It’s expensive. Yeah, if you think like that, you will never invest in ASML. I’ve seen so many clients who waited and never bought it - and they always regret it."
What this means for markets
The episode highlights two tensions for investors: the depth of conviction in a multiyear AI-driven investment cycle and the practical limits of equipment supply chains. ASML’s unique market position and large order backlog support a bullish medium-term view, but the stock’s elevated multiple and the fact that some growth is already embedded in the price have left little margin for disappointment. How the company manages production ramp-up and delivery schedules will be central to whether the market regards the recent advance as sustainable or overextended.