Morgan Stanley has more 'bad news' for Europe's biggest chip company

Global semiconductor equipment giant ASML is facing increasing pressure from Wall Street analysts, who are downgrading their earnings estimates for the company. This latest wave of pessimism comes in the wake of a slump in the memory chip market and growing concerns over demand from Chinese chipmakers and Intel. ASML is among the Europe's largest chip companies.

Morgan Stanley joined UBS and Deutsche Bank in cutting their targets for ASML's share price, following a significant drop in the company's stock price during the summer months. Analysts cited potential weakness in both the DRAM market and Intel's business, as well as concerns about China's semiconductor capacity overspend.

Intel and slowness in China business hurt

Intel's recent decision to pause its expansion plans in Germany for two years has further dampened sentiment surrounding the semiconductor industry. While ASML is expected to benefit from strong demand for its advanced EUV tools from TSMC in 2025, analysts caution against being overly pessimistic about the company's long-term prospects.

Deutsche Bank analysts raised concerns about ASML's China business, which accounted for nearly half of its sales in the second quarter. They suggested that the outlook for spending in China has deteriorated due to overcapacity, and there is a risk that Chinese memory chip makers could be added to the U.S. Entity List, restricting ASML's ability to sell to them.

Despite these challenges, Citi remains bullish on ASML, naming it as their top tech pick in Europe. Analysts expect a healthy influx of orders when the company reports its earnings on October 16th.