On the first trading day of 2026, ASML Holding received what may be the most dramatic analyst upgrade in recent memory. Aletheia Capital, which had maintained a sell rating on the Dutch semiconductor equipment maker, executed a rare double upgrade to buy while slashing its previous skepticism and raising its price target from $750 to $1,500—a potential 40% gain from Thursday's close.

Shares of ASML jumped more than 4.9% on the news, adding billions to the company's market capitalization and signaling that even the bears are capitulating to the AI infrastructure story.

The Reversal: From Skeptic to True Believer

Aletheia's about-face is particularly notable given the firm's previous stance. The research house had been among ASML's most vocal skeptics, warning that the company's premium valuation couldn't be sustained and that cyclical headwinds would eventually catch up with even the most dominant player in semiconductor equipment.

What changed? In a word: TSMC.

Taiwan Semiconductor Manufacturing Company, the world's most important chipmaker and ASML's largest customer, recently announced plans to expand manufacturing capacity by 40% to 50% in 2027. This expansion, driven almost entirely by insatiable demand for AI chips, requires billions of dollars in new equipment—and ASML holds a monopoly on the most advanced lithography machines needed to produce cutting-edge semiconductors.

"TSMC's capacity expansion plans for 2027 are a game-changer for ASML. The company will be one of the primary beneficiaries of what could be the largest single-year capacity buildout in semiconductor history."

— Aletheia Capital research note

The EUV Monopoly: ASML's Unassailable Moat

ASML's dominance rests on a technological achievement that took decades and billions of dollars to develop: extreme ultraviolet (EUV) lithography. These machines, which cost upwards of $200 million each, are the only equipment capable of producing the most advanced chips powering AI data centers, smartphones, and next-generation computing.

The company doesn't just lead the EUV market—it owns it entirely. No competitor has successfully developed an alternative, and the technological barriers to entry are so formidable that analysts don't expect a credible challenger to emerge this decade.

This monopoly position is now paying extraordinary dividends. Aletheia projects ASML's EUV revenue will grow by approximately one-third in fiscal 2026, establishing a foundation for even more impressive gains in 2027, when the firm expects EUV revenue growth to accelerate to between 50% and 60%.

The Numbers Behind the $1,500 Target

Aletheia's new price target implies a market capitalization approaching $600 billion—a level that would place ASML among the most valuable companies in Europe and cement its status as one of the world's most important technology firms.

The math rests on several assumptions:

  • Revenue Acceleration: Low-NA EUV systems (the current generation) are expected to drive revenue growth of roughly 33% in 2026, with acceleration to 50-70% growth in 2027 as High-NA systems ramp.
  • Margin Expansion: As production scales and the company moves up the technology curve, gross margins are expected to expand toward 55%.
  • Multiple Expansion: Aletheia argues that ASML deserves a premium multiple given its monopoly position and the structural growth in AI infrastructure spending.

The China Question: Risk or Opportunity?

One factor that previously weighed on ASML's valuation was uncertainty around China. U.S. export controls have limited the company's ability to sell its most advanced equipment to Chinese customers, and Beijing's push to develop domestic alternatives raised questions about ASML's total addressable market.

Aletheia's updated thesis suggests these concerns are overblown. While China has announced ambitious plans to source 50% of its chip-making equipment domestically, the reality is that no Chinese company is close to replicating ASML's technology. The domestic alternative push may eventually produce viable DUV lithography systems, but EUV remains beyond reach.

Meanwhile, the revenue ASML can't earn in China is more than offset by exploding demand from TSMC, Samsung, and Intel—all of which are racing to build AI chip manufacturing capacity in the United States, Europe, and allied nations.

What This Means for Investors

ASML already gained 53% in 2025, and the stock trades at approximately 34 times forward earnings—a premium valuation by any measure. The Aletheia upgrade raises an important question: Is there still upside, or is the AI infrastructure story fully priced in?

Bulls argue that traditional valuation metrics understate ASML's value because they fail to capture the company's monopoly position and the structural nature of AI infrastructure demand. Unlike many technology investments that carry execution risk, ASML's revenue is essentially guaranteed by customer commitments made years in advance.

Bears, though increasingly scarce, point to the cyclical nature of semiconductor equipment spending. While the current AI-driven cycle appears sustainable, the industry has a history of boom-and-bust patterns that have punished investors who bought at peaks.

The Broader Semiconductor Outlook

Aletheia's upgrade arrives amid a flurry of bullish calls on the semiconductor sector. Bank of America recently forecast that the global chip industry will reach $1 trillion in annual revenue by the end of 2026—a milestone that seemed impossibly distant just a few years ago.

The AI infrastructure buildout is the primary driver. Data centers are being constructed at unprecedented rates to support large language models and generative AI applications. Each of these facilities requires enormous quantities of advanced chips, and those chips require ASML's machines to manufacture.

For investors seeking exposure to the AI revolution without betting on which application or service will ultimately win, ASML offers something unique: a monopoly position in the picks-and-shovels of the entire industry. Whether the eventual AI winners are OpenAI, Google, Microsoft, or companies that don't yet exist, they will all need chips—and those chips will be made using ASML equipment.