(Bloomberg) — UBS Group AG ended a bullish call it’s held for two years on European tech darling ASML Holding NV, warning that the earnings growth potential from artificial intelligence is becoming overhyped.
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Analysts at the bank downgraded the stock to hold from buy after the share price surged more than 60% since UBS first implemented its buy rating in August 2022.
“Investors will likely be less willing to pay the premium multiple that ASML has commanded over the last few years,” even though the firm is “one of the best fundamental stories in the European tech sector,” the UBS analysts including Francois-Xavier Bouvignies wrote in a note published Wednesday.
The downgrade mirrors wider market misgivings that the mania surrounding artificial intelligence has gone too far. Nvidia Corp. shares plunged 9.5% on Tuesday, accelerating a slump that started last week and sending ripples through the wider semiconductor space. ASML shares fell as much as 7.1% on Wednesday, touching the lowest level in a month.
ASML is still rated a buy by more than three quarters of Wall Street analysts who track the company, with just one recommending selling the stock, according to data compiled by Bloomberg.
Revenue growth at the Dutch chip-equipment maker is likely to slow after 2025, the UBS analysts said. With the industry shifting toward a new transistor architecture, companies that make logic chips will prioritize spending elsewhere instead of ASML’s lithography tools, they said.
Revenue Outlook
Stockpiling of ASML’s high-end machines by memory chipmakers may not persist after 2025 because the capacities built now can be reused for future products, according to the analysts. Taken together, AI-related demand will probably account for just 10% to 15% of the company’s revenue over the next few years, they said.
ASML is expected to outline its long-term forecasts during the investor day on Nov. 14.
Separately, Dutch newspaper Eindhovens Dagblad reported that ASML is delaying current orders for some machine parts with its suppliers, citing unidentified people close to the company. A spokeswoman for ASML said the company sticks to its commentary given with the presentation of second-quarter results.
(Adds Eindhovens Dagblad report and company response in final paragraph.)
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