ASML's Surge Masks Valuation Risks Amid AI Hype

What happened

ASML's stock climbed 11% over the past month, fueled by optimism around AI-driven EUV demand, a robust €38.8 billion backlog, and upward revisions to 2026 estimates. This rally reflects market enthusiasm for ASML's near-monopoly position in advanced lithography and its role in the AI infrastructure build-out. However, the DeepValue report indicates that the stock is trading at elevated multiples (~48x P/E) with no margin of safety, already pricing in perfect execution of growth plans. Key risks include execution challenges, potential delays in fab readiness, tightening export controls, and sluggish High-NA adoption, which could lead to earnings downgrades. The recent price increase may have exacerbated valuation concerns, making the stock vulnerable to a correction if any of these risks materialize.

Implication

The stock's surge to $1,428, up 109% over 12 months, has fully capitalized on AI tailwinds, with a P/E of 48x indicating high expectations. Given the 'POTENTIAL SELL' rating and conviction level of 4.0, fresh capital at current levels is discouraged due to asymmetric downside risk. Investors should monitor execution against 2026 guidance, customer capex updates, and export policy developments for signs of slippage. A more attractive entry point would be around $1,150, where long-term growth prospects outweigh valuation concerns. In the near term, trimming positions or holding off on new buys is prudent until clarity emerges on backlog conversion and High-NA ramp.

Thesis delta

The recent 11% climb further entrenches ASML's overvalued position, aligning with the DeepValue report's view that the stock lacks margin of safety. However, no new fundamental data alters the core investment thesis; instead, it emphasizes the need for caution as momentum may be outpacing reality.