ASML capacity upgrade soothes AI chip bottleneck fears

By Toby Sterling and Nathan Vifflin

AMSTERDAM, July 15 (Reuters) - ASML, the world's dominant supplier of equipment needed to make high-tech computer chips, raised its 2026 sales forecasts on Wednesday and pledged a capacity boost that may ease fears a production bottleneck could slow the AI boom.

Its second forecast hike of the year came as Europe's most valuable listed company, whose machines help make chips for Nvidia's contract chipmaker TSMC, beat second-quarter earnings forecasts, pushing its shares up nearly 4%.

"Blow-out results across the board," said Degroof Petercam analyst Michael Roeg.

ASML said it would increase capacity by 30% in each of the coming two years to meet what CEO Christophe Fouquet described as "extremely strong" customer demand for its lithography "chip-printing" tools required to make advanced AI chips.

ASML CAPACITY HAD BEEN VIEWED AS A BOTTLENECK

The strong earnings and production boost send a positive signal for the wider market as chip demand has rocketed due to a global data centre build-out and increased use of AI tools.

"Easing lithography constraints is also positive for the broader equipment ecosystem, where ASML has been viewed as a key bottleneck," said analyst Marc Hesselink in a note.

He added the beat, guidance hike and "improved visibility" could further support ASML's shares.

ASML said it now expects full-year 2026 net revenue of €43 billion to €45 billion ($49 billion to $51 billion), an increase of 16% at the midpoint from its earlier forecast range of €36 billion to €40 billion.

The Amsterdam-listed shares, up 75% in the year to date, rose 3.7% to €1,613 at 1000 GMT.

ASML CUSTOMERS ACCELERATE CAPACITY EXPANSION PLANS

The Dutch company is the world's only maker of extreme ultraviolet lithography (EUV) tools, which are needed to create the nanometre-scale circuitry of advanced logic and memory chips that go into data centres built by Google and Amazon and run the models built by OpenAI and Anthropic.

"Our customers in turn continue to accelerate their capacity expansion plans ... providing ASML with increased visibility into longer-term demand," CEO Fouquet said in a statement.

ASML customers include TSMC, as well as memory chip makers Samsung, SK Hynix and Micron, all of whom are expanding capacity.

ASML said it intended to expand capacity by nearly a third per year for its flagship EUV tools, though Fouquet said nearly all of its expanded EUV capacity through 2027 is already fully booked.

It plans to similarly ramp up capacity for deep ultraviolet (DUV) tools, which are needed for less advanced chips and by customers in China.

CFO Roger Dassen told reporters that the capacity expansion takes into account the needs of new customer Terafab, which Elon Musk is building in Texas to supply chips to SpaceX and Tesla.

Analysts from JPMorgan said they believed Wednesday's results would help ASML close a valuation gap with U.S. peers.

"The message from bears has been that they are capacity-limited or that they don't grow ... (but) the company is virtually guiding 30% growth in the next two years," they said.

Separately, Fouquet said Intel will use ASML's new High-NA tool to make some of its most advanced "Panther Lake" chips, marking a first for the technology.

ASML's revenue for the three months ended June 30 was €9.33 billion, topping analysts' estimates of €8.80 billion, while net income was €2.92 billion, above expectations of €2.62 billion, according to LSEG data.

CHINESE DEMAND STRONG DESPITE U.S.-LED EXPORT RESTRICTIONS

Dassen reiterated ASML's estimate that Chinese customers will account for about 20% of sales this year — less in percentage terms than in the past several years, but increasing in absolute terms as ASML's sales rise.

"The Chinese market is moving in sync with the overall behaviour that we see globally," he said in a video statement.

ASML is barred from selling EUV tools and its best DUV tools in China due to U.S.-led export restrictions, but it does sell less-capable DUV machines to customers there that are capable of making relatively advanced chips.

Dassen said demand is strong from Chinese makers of logic chips, which are used in electrical grids, AI, computers and smartphones for the Chinese domestic market.

U.S. lawmakers have proposed a law that could further restrict the company's China sales, a continuing business risk for ASML.

($1 = 0.8742 euros)

(Reporting by Toby Sterling in Amsterdam, Nathan Vifflin in Gdansk; Editing by Matt Scuffham and Joe Bavier)