What’s Driving ASML Stock’s 50% Rebound?

ASML (NASDAQ:ASML), the Dutch semiconductor equipment giant seen as one of the most crucial companies in the semiconductor ecosystem, has seen its stock climb nearly 8% over the past week, while surging by almost 50% from levels seen in early August. The rally follows a period of renewed optimism around the semiconductor cycle, led by strong quarterly results, resilient long-term guidance, and AI-related chip demand which shows no signs of letting up. ASML’s unique position in the ecosystem – as the sole supplier of extreme ultraviolet (EUV) lithography machines used to make the world’s most advanced chips – makes it a critical enabler of the AI and computing revolution. With momentum returning to the stock and sentiment turning more positive after months of uncertainty, investors are now asking: what’s driving this recovery – and could ASML’s stock have more room to run?

Image by Joachim Schnürle from Pixabay

What’s Driving The Recovery?

Net sales came in at Euro 7.5 billion (about $8.7 billion) and fourth-quarter sales are projected at between Euro 9.2 billion ($10.7 billion) and Euro 9.8 billion ($11.4 billion), putting full-year revenue around Euro 32.5 billion ($37.8 billion) – a number that aligns with the midpoint of the company’s initial full-year forecast issued in January. ASML expects its full-year gross margin to come in slightly above 52% and reiterated its 2030 targets of Euro 44 billion ($51.2 billion) to Euro 60 billion ($69.8 billion) in revenue and a gross margin between 56% and 60%.

Still, concerns about demand persist. The company foresees a decline in sales to Chinese customers in 2026 compared to 2024 and 2025 — a notable risk, considering that China accounted for roughly 42% of ASML’s system sales in the most recent quarter. This expected slowdown stems from tightened export restrictions by the Dutch government, in coordination with U.S. policy, which limits sales of ASML’s most cutting edge lithography machines to Chinese chipmakers. Even so, management reassured investors that 2026 net sales should not fall below 2025 levels. This is an important clarification, since uncertainty about the company’s outlook had weighed on the stock in recent months.

On the demand front, overall AI spending is still running hot. Giants like Nvidia and Broadcom are posting massive growth as the surge in training and running complex models fuels demand for high-performance semiconductors – the very kind ASML’s machines make possible. In fact, the company says several of its biggest customers are already ramping up EUV capacity to keep pace with the growing appetite for AI chips. To get a sense of the scale of the investments, Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), and Meta (NASDAQ:META) indicated that they could spend a cumulative $364 billion-plus in capex for their respective current fiscal years.  A lot of this could indirectly filter down into more demand for ASML.

Is The Stock A Buy?

ASML stock trades at 36x estimated FY2025 earnings, which is a slightly elevated multiple, but there are positives for the stock. ASML’s revenues are on track to grow by a relatively strong 15% this year, per consensus estimates. Over the last quarter, ASML reported net bookings of 5.4 billion euros ($6.3 billion), and a roughly 33 billion euro backlog ($38 billion). With 12-to-18 month lead times for most of its products, today’s orders should actually reflect customer confidence well beyond 2026, boding well for future revenue growth. Moreover, the company’s dominant position, cutting edge and highly proprietary technology, and exposure to the generative AI trend could also make the stock attractive.

ASML builds the most sophisticated manufacturing tools in the semiconductor industry, and arguably the world. Its crown jewel remains its extreme ultraviolet (EUV) lithography machines. These systems use ultra-short wavelengths of light to etch fine circuit patterns onto silicon wafers, enabling the leading end chips of 5 nanometers and below. In simple terms, without ASML, the processors that drive AI data centers, smartphones, and even modern cars simply wouldn’t exist. That makes ASML a one-of-a-kind company. EUV is an important technology for extending Moore’s Law, the long-standing industry trend of doubling transistor density approximately every two years, allowing chipmakers to continue pushing the limits of computing power and cost-effectiveness. This should reinforce the long-term case for the stock.

Learn more about Trefis RV strategy that has outperformed its all-cap stocks benchmark (combination of all 3, the S&P 500, S&P mid-cap, and Russell 2000), to produce strong returns for investors. Separately, if you want upside with a smoother ride than an individual stock like ASML, consider the High Quality portfolio, which has outperformed the S&P, and clocked >105% returns since inception. As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.