ASML's AI Narrative Confronts Valuation Excess and China Headwinds

What happened

A Seeking Alpha article highlights ASML's short-term China revenue uncertainty and long-term AI opportunity, but the DeepValue master report reveals a more critical stance. At $1,273.88 with a 44x P/E, ASML's stock prices in a flawless AI upcycle, yet management only commits that 2026 sales will not fall below 2025 amid a significant China reset. The slower-than-expected High-NA EUV transition delays a key growth driver to 2027+, compounding near-term risks. While AI and DRAM demand offer post-2026 tailwinds, the report rates ASML as a POTENTIAL SELL due to crowded bullish sentiment and high valuation. This sets up a precarious scenario where any disappointment in 2026 guidance or EUV bookings could trigger sharp multiple compression.

Implication

Near-term, ASML's stock is highly vulnerable to downside if 2026 revenue guidance misses or EUV bookings weaken for two consecutive quarters, likely compressing multiples from elevated levels. The projected sharp China revenue drop in 2026 demands robust offsets from non-China AI and DRAM capex, which may not fully materialize, risking flat growth. High-NA delays push out material revenue contributions, undermining the growth assumptions baked into the current 44x P/E. Long-term fundamentals remain strong due to ASML's EUV monopoly and AI demand, but investors should wait for a pullback below $1,000 for better risk-reward. Key monitors include Q4 2025 results, detailed 2026 guidance, and EUV booking trends over the next 6-12 months to validate the bullish narrative.

Thesis delta

The new analysis reinforces the DeepValue report's caution, shifting the thesis from pure AI-driven growth optimism to a recognition that near-term execution risks and valuation excesses are paramount. This emphasizes a more defensive approach, where investors should prioritize price discipline over narrative until clear evidence emerges that non-China demand can offset China declines and High-NA ramps as expected.