ASML's €13B Memory Bet: Strong Results, But Valuation Limits Upside

What happened

ASML reported superb Q2 results with revenue up 21% to €9.3B and net income up 26% to €2.9B, while raising 2026 guidance to €43-45B, driven by AI demand and a €13 billion memory bet that management calls structural, not cyclical. However, the stock has already rallied 77% from a year ago, trading at 59.4x P/E and 46.8x EV/EBITDA, implying the market fully prices in flawless capacity expansion and manageable export controls. The bullish narrative overlooks the risk that China still represents ~20% of sales and that any slip in 2027 capacity execution or customer fab readiness could trigger a de-rating. The DeepValue master report maintains a WAIT rating, finding no margin of safety at current levels, with an attractive entry near $1,550 and trim above $1,900. While the memory bet strengthens the long-term demand thesis, near-term upside is constrained by elevated expectations and execution risk.

Implication

For existing holders, the raised guidance and memory-driven demand provide a solid foundation, but the 59x P/E means the stock is vulnerable to any disappointment in capacity expansion, China restrictions, or customer ordering patterns. The DeepValue report suggests a re-assessment in 3-6 months, with a trim level at $1,900. Long-term investors could wait for a pullback near $1,550 to add, as the structural demand from memory and logic is genuine. The key watchpoints are ASML's ability to execute on 2027 capacity and the evolution of export controls. In the meantime, the stock offers limited upside from current levels despite the strong operational performance.

Thesis delta

The news article's 'ratchet' thesis adds conviction to the demand side of the DeepValue report, but does not alter the core valuation concern. The DeepValue report already anticipated strong demand and raised guidance, so the bull case is well-known. The delta is that the memory bet may increase the probability of the bull scenario (implied value $2,000) but also heightens the risk of capacity bottlenecks becoming a constraint. The thesis remains WAIT, as the risk/reward is not compelling at current prices, and investors should look for a better entry point or confirmation of execution before committing new capital.