on 05-Jan-2026 4 January 2026 EU Semiconductors EU Semis: 2026 outlook - Upgrading ASML to Outperform and Top Pick David Dai, CFA +852 2918 5704 david.dai@bernsteinsg.com Carmine Milano +44 20 7762 1857 carmine.milano@bernsteinsg.com 4F2 migration is still a concern for EUV as feature size would increase, but it is likely to be postponed as suppliers prioritize manufacturability over cost in an up cycle. Advanced logic will be another driver with TSMC reportedly expanding 3nm capacity to 180-200kwpm to addr ...

Core Insights - Meta Platforms, ASML, and CrowdStrike are potential candidates for stock splits in 2026, which could enhance accessibility for average investors and serve as a positive catalyst for their stock prices [1][2]. Meta Platforms - Meta Platforms is the only stock among the "Magnificent Seven" that has never split its stock, with a current price nearing $700, suggesting a possible split in 2026 [4]. - The company aims to bolster market confidence in its significant AI infrastructure investments while reducing spending on metaverse projects, indicating a strategic shift [5]. - Meta's AI initiatives have positively impacted ad revenue, contributing to a 26% revenue increase last quarter [7]. ASML - ASML's stock price exceeds $1,000, making it a strong candidate for a stock split in 2026, with its last split occurring in April 2000 [8]. - The company holds a monopoly on extreme ultraviolet lithography (EUV), essential for advanced semiconductor chips, positioning it well for the ongoing AI boom [9]. - ASML is developing a new generation of lithography technology, High-NA EUV, which will further enhance chip manufacturing capabilities [11]. CrowdStrike - CrowdStrike's stock price is over $500, and it has never split its stock, making 2026 a potential year for a split as its annual recurring revenue (ARR) begins to accelerate [12]. - Following a significant IT outage in 2024, CrowdStrike introduced a flexible licensing model, Falcon Flex, which has improved customer engagement and led to a 23% ARR growth last quarter [14]. - The company is experiencing strong momentum with its next-generation solutions, with nearly half of its customers using six or more modules [15].

Core Viewpoint - ASML has experienced significant stock growth, rising 59% year-to-date, outperforming major semiconductor stocks and the S&P 500 [2][3]. Company Overview - ASML is a leading manufacturer of machines that produce high-end semiconductor chips, utilizing advanced extreme ultraviolet (EUV) technology, which allows for smaller and more powerful chip components [5][7]. - The company is the sole manufacturer of EUV machines, providing it with a unique competitive advantage in the semiconductor industry [7]. Financial Performance - In the third quarter, ASML reported revenue of 7.51 billion euros ($8.73 billion), a decrease of 2.2% year-over-year, with net bookings at 5.4 billion euros [8]. - The company achieved a gross profit of 3.88 billion euros, resulting in a gross margin of 51.6% and net income of 2.12 billion euros, equating to earnings of 5.49 euros per share [9]. - ASML's guidance for fourth-quarter sales is projected between 9.2 billion euros and 9.8 billion euros, with a margin of 51% to 53% [10]. Market Position - ASML's market capitalization has reached approximately $428 billion, placing it among the top 25 largest publicly traded companies globally [3]. - The stock is currently trading at an all-time high, with a current price around $1,099.47 [10]. Analyst Sentiment - Analysts are largely bullish on ASML, with JPMorgan raising its price target from $1,175 to $1,275, indicating a potential upside of 15% [11]. - Morgan Stanley also increased its price target from $1,132 to $1,161, with only one out of 42 analysts recommending a sell [12]. Future Outlook - The company is viewed as a strong candidate for a stock split as it approaches 2026, having not conducted a split since 2000 [13].

Core Viewpoint - The article discusses the potential for stock splits in 2026 for Meta Platforms, ASML, and Eli Lilly, highlighting their strong earnings growth and stock performance as key factors for these splits [3][4][13]. Meta Platforms - Meta Platforms is predicted to execute a 5-for-1 stock split in 2026, marking its first split since its IPO 14 years ago [4]. - The company has a market capitalization of $1,667 billion and a current share price of $661.53, with a gross margin of 82% [6]. - Meta's business model, driven by its family of apps, generates stable cash flow, making it resilient during economic downturns [7]. - The company is expected to replace Verizon Communications in the Dow if it proceeds with the stock split [7]. ASML - ASML is anticipated to issue a 10-for-1 stock split in 2026, with its share price currently over $1,100 and a market cap of $430 billion [8][11]. - The company holds a monopoly on extreme ultraviolet (EUV) machines essential for advanced chip fabrication, positioning it well for future earnings growth [9]. - ASML is viewed as a key player in the AI chip market, with expectations of becoming Europe's first $1 trillion company by 2035 [12]. Eli Lilly - Eli Lilly is also predicted to implement a 5-for-1 stock split in 2026, having seen its stock price surge over 600% in the last five years, reaching a market cap of $959 billion [13][17]. - The company's growth is largely attributed to its successful GLP-1 medications, with projected earnings per share of $23.69 in 2025 and $32.18 in 2026, reflecting a 35.8% increase [14]. - Eli Lilly's diverse drug portfolio and strong gross margin of 83.03% position it well for continued earnings growth, making it a prime candidate for a stock split [17].

Core Insights - ASML plays a foundational role in advancing AI by providing essential lithography machines necessary for chip manufacturing, particularly in producing advanced AI chips [4][14][17] Company Overview - ASML is the most valuable company in Europe, located in a small city in the southern Netherlands, and is not listed in the S&P 500 [4] - The company has a market capitalization of $430 billion, with a current stock price of $1,111.76 and a gross margin of 52.70% [9] Role in Semiconductor Manufacturing - ASML's extreme ultraviolet (EUV) machines are critical for producing chips with nodes below 7 nanometers, which are essential for advanced AI applications [10][12] - The company has a monopoly on the high-precision machines needed for the production of today's most advanced AI chips, making it a key player in the semiconductor industry [17] Technological Advancements - ASML's EUV machines utilize 13.5nm light for printing features with resolutions unattainable by traditional deep ultraviolet (DUV) machines, enhancing transistor density and performance [12] - The company offers different classes of NXE lithography systems designed for various chip production processes, with high-NA machines providing even greater precision [11][14] Market Position and Future Outlook - ASML is well-positioned to capitalize on the increasing demand for smaller and more powerful AI chips, as its machines are integral to the manufacturing processes of major chipmakers like Nvidia and AMD [16][20] - Approximately 27% of ASML's sales come from servicing its existing equipment, indicating a diversified revenue stream beyond just new machine sales [19] Investment Perspective - ASML is considered a "pick-and-shovel" stock for the AI era, as it benefits from the overall growth in semiconductor demand without being tied to the fortunes of specific chipmakers [2][20]

Core Insights - ASML has fully recovered from a sell-off in April, showing a year-to-date increase of 45.7%, significantly outperforming the S&P 500's 13.4% [1] Financial Performance - In Q3 2025, ASML reported net sales of 7.5 billion euros and provided guidance for Q4 sales between 9.2 billion and 9.8 billion euros, projecting around 32.5 billion euros for the full year, aligning with initial forecasts [3] - The company expects a gross margin slightly above 52% for the full year and reaffirmed its 2030 revenue goals of 44 billion to 60 billion euros with a gross margin target of 56% to 60% [4] Product Innovation - ASML's next-generation extreme ultraviolet (EUV) systems are increasingly contributing to revenue, with sales of 9 EUV machines in the latest quarter, including a high-numerical aperture system [5][6] - The average price for the 9 EUV machines sold was approximately 400 million euros each, indicating their significant impact on ASML's sales and business transformation [6] Industry Impact - EUV technology is revolutionizing chip manufacturing, enabling the production of complex designs for AI applications by using shorter wavelengths for smaller features and higher transistor density [7] - EUV is essential for producing chips with nodes below 3 nanometers, supporting the advanced chip architectures required by companies like Nvidia, Broadcom, and AMD [8] - ASML's EUV machines are critical for manufacturing sophisticated AI chips, which are becoming a larger portion of its sales, expected to enhance profit margins over time [9]

Core Insights - ASML is positioned to benefit significantly from the growth in AI chip manufacturing, making it a key player alongside other semiconductor companies like Nvidia and AMD [1][5] - ASML is the most valuable publicly traded company in Europe, with shares trading around $1,000, making it a top investment choice for those looking to invest in AI growth stocks [2] Business Segmentation - ASML's operations are divided into three main categories: servicing installed equipment, DUV device production, and EUV device production, with a growing focus on AI-related products [3] - The latest earnings report indicates that EUV devices accounted for 48% of net sales, highlighting the increasing importance of advanced chip manufacturing in ASML's revenue [4] Earnings Quality and Valuation - ASML is viewed as a reliable investment for AI chip production, benefiting from overall market growth rather than specific market share gains [5] - The company has a forward price-to-earnings (P/E) ratio of 36.3, which is considered fair given its dominant position in the advanced AI chip manufacturing equipment market [6] - Emphasis is placed on the importance of earnings quality over mere growth projections, suggesting that ASML's consistent earnings growth makes it a more stable investment compared to other high P/E stocks [7] Investment Outlook - ASML is recommended as a strong investment for those anticipating a long-term increase in demand for AI chips, as the need for advanced manufacturing technology will continue to rise [9]

Group 1: Palantir Technologies - Palantir Technologies has experienced a significant surge in demand for its AI platform, leading to a notable increase in its stock price [1] - The company's revenue and earnings growth in recent quarters has resulted in a 5x increase in stock price over the past year, with a current market cap of $385 billion [2] - The strong demand for Palantir's AI software has driven its stock performance, but it is currently trading at a high valuation multiple [8] Group 2: ASML Holding - ASML Holding is a key player in the semiconductor industry, holding a near-monopoly in extreme ultraviolet lithography (EUV) machines essential for advanced chip manufacturing [4][5] - The company reported a 40% sequential increase in net bookings to 5.5 billion euros in Q2 and expects 15% revenue growth to 32.5 billion euros by the end of 2025 [6] - ASML's revenue increased by 34% in the first half of 2025, indicating potential for stronger-than-expected performance due to robust AI infrastructure spending [7]

Core Viewpoint - The demand for AI chips is expected to positively impact ASML's future, despite its cyclical nature and recent struggles in performance [1][3]. Company Overview - ASML is a leading semiconductor equipment maker, essential for the production of advanced chips, particularly through its extreme ultraviolet lithography (EUV) technology [5][6]. - The company’s highest-end EUV machines are priced over $400 million, and clients spend billions annually on maintenance, indicating a strong dependency on ASML's products [7]. Market Dynamics - The AI chip market is projected to grow at a compound annual growth rate (CAGR) of 29% through 2030, which is expected to drive ASML's sales significantly [7]. - Major competitors in the advanced chip manufacturing space include TSMC, Samsung, and Intel, limiting ASML's client base for its most advanced equipment [8]. Financial Performance - In the first half of 2025, ASML reported revenue of €15.4 billion ($18.0 billion), a 34% increase from the same period in 2024, with a gross margin of 53.7% [10]. - The company maintained controlled growth in costs and expenses, resulting in a net income of over €4.6 billion ($5.4 billion) for the first two quarters [11]. - Despite positive first-half results, ASML's outlook for the second half of the year has become less optimistic, expecting a 15% annual net sales growth for 2025 and a decrease in gross margins to 52% [11]. Valuation and Future Outlook - ASML's current P/E ratio of 28 is at a multiyear low, suggesting potential for multiple expansion as the market for AI-ready semiconductors grows [12]. - Over the next five years, ASML is expected to outperform the market, driven by the increasing demand for AI chips and its critical role in the semiconductor supply chain [13][14].

Core Viewpoint - ASML is a dominant player in the lithography market, crucial for the production of modern electronics, and has shown significant long-term stock performance despite recent volatility [1][2][4]. Financial Performance - ASML's stock has increased over 600% in the last decade, outperforming the S&P 500's 200% return [2]. - In Q2 2025, ASML reported net sales of 7.7 billion euros and earnings per share (EPS) of 5.9 euros, both exceeding expectations [7]. - The company achieved net bookings of 5.5 billion euros in Q2, a 30% increase over analyst expectations of 4.2 billion euros [8]. Market Position and Demand - ASML's extreme ultraviolet (EUV) lithography machines are essential for semiconductor manufacturers, accounting for 48% of Q2 net system sales [6][7]. - The semiconductor industry is expected to see increased capital expenditures driven by trends in AI, driverless cars, and renewable energy [9]. Future Outlook - ASML projects revenue between 44 billion euros and 60 billion euros by 2030, with a midpoint estimate of 52 billion euros, indicating a 60% growth from current expectations of 32.5 billion euros [12]. - The company's price-to-earnings ratio (P/E) of 31 is below its 10-year average, suggesting potential for long-term investment [10]. Competitive Advantage - ASML maintains a strong market position with high profit margins and a robust balance sheet, making it less vulnerable to competition [13]. - The company is considered well ahead of competitors in the lithography market, which supports its business stability [13].