Bernstein Quick Take: ASML - High-NA EUV adoption postponed?
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Bernstein published a quick take on ASML following TSMC's announcement that it will not adopt High-NA EUV lithography technology through 2029. While the market reacted negatively to the news, Bernstein views the development as unsurprising. TSMC had previously signaled that its A14 node would bypass High-NA, and the foundry has a well-established pattern of conservatism regarding new technology adoption.
Crucially, Bernstein argues that a delay in High-NA adoption could actually be neutral to positive for ASML's financials. Low-NA equipment currently generates equivalent revenue per wafer exposure compared to High-NA systems. Given that Low-NA machines carry higher profit margins, selling additional Low-NA systems can be highly lucrative. For instance, if one High-NA exposure replaces three Low-NA exposures, ASML benefits financially from selling three separate Low-NA tools.
Despite the uncertain timing of High-NA adoption, other customers may step in. Bernstein speculates that Intel could adopt High-NA in 2028 or 2029, with SK Hynix potentially following suit in 2028. From a valuation perspective, ASML is currently trading at 36.6 times earnings, representing a historically low multiple relative to its industry peers. Bernstein views this valuation discount as unwarranted and maintains an Outperform rating on the stock. The firm has set a target price of EUR 1,700 for ASML's European shares and $1,971 for its US-listed ADRs.