ASML's EUV Leadership and China Market Normalization Position the Company for Growth in 2026

ASML, the world’s leading manufacturer of semiconductor production equipment, has captured investor attention with its stock price nearly doubling over the past year. As the sole producer of extreme ultraviolet (EUV) lithography systems—essential technology for manufacturing the world’s most advanced chips—the Dutch company stands at the center of the global AI chip revolution. Yet the investment case for ASML extends beyond its dominant EUV market position. The stabilization of China’s markets and the company’s strengthened financial guidance suggest even greater momentum ahead in 2026.

The Strategic Advantage: EUV as Essential Infrastructure for AI

ASML’s competitive moat rests on a single powerful fact: it alone manufactures advanced EUV lithography systems that optically etch intricate circuit patterns onto silicon wafers at unprecedented scales. This monopoly represents far more than market dominance—it’s central to global semiconductor supply chains.

Every leading foundry, including TSMC, Samsung, and Intel, depends on ASML’s EUV systems to produce their most sophisticated chips. Fabless chipmakers like Nvidia, AMD, Broadcom, and Qualcomm outsource production to these foundries, making ASML an indispensable “picks and shovels” enabler. Without access to cutting-edge EUV technology, these manufacturers couldn’t produce the latest AI accelerators and processors that power today’s AI infrastructure buildout.

The AI infrastructure market itself is projected to expand at a 29.1% compound annual growth rate (CAGR) through 2032, according to Fortune Business Insights. This trajectory virtually guarantees sustained demand for ASML’s equipment, insulating the company from competitive pressures that plague individual chip designers.

China’s Market Stabilization Unlocks New Growth

A often-overlooked tailwind for ASML in 2026 is the normalization of its China business following years of export restrictions. From 2024 into 2025, U.S. export controls constrained ASML’s ability to sell advanced lithography equipment into China, creating a temporary revenue headwind. However, the company’s 2025 results reflected a meaningful improvement as China sales stabilized.

This stabilization doesn’t signal a return to pre-restriction levels overnight, but it removes a significant uncertainty that weighed on investor sentiment. As geopolitical tensions remain fluid, even modest growth in the China market provides incremental upside to ASML’s financial forecasts. The company’s 38.8 billion euros ($46.4 billion) order backlog at year-end 2025—the strongest on record—already reflects this improving demand environment.

Memory Chip Recovery Amplifies Equipment Demand

Beyond leading-edge AI chips, ASML benefits from cyclical recovery in the memory semiconductor market. After the 2022-2023 downturn triggered by PC and smartphone stagnation combined with higher interest rates, the memory sector has rebounded sharply. The stabilization of consumer electronics demand, declining borrowing costs, and accelerated data center expansions to support AI services have reignited memory chip buying.

This recovery directly translates into higher orders for ASML’s lithography systems. Memory manufacturers like Micron utilize both advanced EUV systems for cutting-edge DRAM production and deep ultraviolet (DUV) systems for NAND flash memory. With solid-state drive (SSD) and high-bandwidth memory (HBM) chip production ramping up, ASML is well-positioned to capitalize on this multi-year expansion cycle, which analysts expect to persist through at least 2027.

Financial Momentum Validates the Investment Thesis

ASML’s 2025 performance demonstrates the powerful convergence of these growth drivers. Net revenues expanded 16% to 32.7 billion euros ($39.1 billion), gross margins widened to 52.8%, and earnings per share jumped 28%—a sharp turnaround from 2024’s modest 3% revenue growth and declining profitability. Orders accelerated dramatically in the second half of 2025, creating the record-setting backlog.

Reflecting this momentum, ASML raised its 2026 revenue guidance to 34 billion euros ($40.7 billion) to 39 billion euros ($46.6 billion)—implying 12% growth at the midpoint, well ahead of the 7% growth analysts had previously anticipated. The company projects revenues will reach 44 billion euros ($52.6 billion) to 60 billion euros ($71.8 billion) by 2030, representing a 10% five-year CAGR from 2025.

Why Premium Valuation Is Justified

At 42 times this year’s projected earnings, ASML’s stock price commands a significant premium. Yet this valuation reflects genuine competitive advantages. With EPS expected to grow at a 22% CAGR through 2027, the company’s earnings power will expand faster than most peers. Combined with its irreplaceable position in the semiconductor ecosystem, exposure to the booming AI market, recovery in memory chip demand, and stabilization of China’s markets, ASML’s premium valuation appears well-grounded for investors with a multi-year horizon.

The convergence of EUV dominance, memory market recovery, China market normalization, and raised financial guidance creates a compelling backdrop for ASML’s 2026 prospects. While no investment is risk-free, the company’s strategic positioning suggests meaningful opportunity for long-term shareholders.