Home / Business and Economy / ASML's Rally Tests Limits Amid Record Orders
ASML's Rally Tests Limits Amid Record Orders
29 Jan
Summary
- ASML shares rallied significantly, making it Europe's most valuable company.
- Record orders place immense pressure on ASML's production capacity.
- Investor appetite is being tested by ASML's high valuation and stretched expectations.
ASML's stock experienced a significant rally, elevating it to become Europe's most valuable company. However, recent trading showed a sharp reversal as concerns surfaced regarding its capacity to meet a backlog of 38.8 billion euros in record orders. The Dutch firm, the sole producer of essential EUV lithography systems for advanced chip manufacturing, is vital for companies like TSMC, Nvidia, Samsung, and SK Hynix.
Despite the stock's impressive 34% rise this month and a valuation at 42 times 2026 earnings estimates, questions about meeting future demand persist. ASML's CEO has assured that the company will not become a bottleneck for the sector. Analysts remain divided, with some recommending the stock for its long-term AI-driven growth prospects, while others caution about the steep multiples.
Investor sentiment reflects a keen interest in ASML as a way to capitalize on rising chip demand. While some analysts believe ASML's valuation is reasonable given the ongoing AI investment cycle, others point to potential risks if demand significantly outpaces supply. The company's ability to scale production efficiently is key to sustaining investor confidence.
