ASML downgraded; semicap rally may be running ahead of reality

Investing.com -- New Street Research downgraded ASML to Neutral, saying the recent surge in semiconductor equipment stocks has left little room for upside as AI spending expectations may already be baked into forecasts.

The brokerage said AI-related capital expenditure is set to triple by 2030, implying about $130 billion of wafer fab equipment investment but most of that acceleration will occur between now and 2026, leaving weaker growth beyond.

It estimates AI data centre spending will rise 44% next year and 27% in 2027, with wafer equipment demand for AI peaking at about $24 billion in 2026 before flattening.

New Street said all major semicap names now trade 2–12 turns above historical valuation averages. ASML has rallied 44% since the brokerage upgraded it earlier this year, outpacing peers that are up about 23% on average.

With limited scope for further earnings upgrades and a potentially softer reporting season ahead, the firm called the current setup “risky” and maintained Neutral ratings on KLA, Applied Materials, Lam Research and Tokyo Electron.

The note questioned whether the sector’s AI-led rally has legs, arguing that even if total spending surprises to the upside, for example if OpenAI ramps faster it is unlikely to shift the near-term outlook enough to justify current multiples.

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