By Henry Ren

(Bloomberg) -- Morgan Stanley laid out its bullish case for why investors should buy ASML Holding NV shares, saying in the most optimistic scenario the stock has a 70% rally ahead as chipmakers ramp up spending to meet soaring demand for artificial intelligence.

The Dutch semiconductor equipment maker is one of the bank’s top stock picks. Morgan Stanley analysts said they’re even more positive after Taiwan Semiconductor Manufacturing Co., ASML’s biggest client, showed the AI spending boom isn’t slowing down. ASML shares are up 25% so far in 2026, marking a roaring start to the year.

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“Higher 2027 foundry and memory capex as well as better-than-feared China demand drives our conviction,” wrote analysts including Lee Simpson in a note dated Thursday.

In the bank’s bull case, ASML shares could reach as high as €2,000, if profits exceed their expectations and tech valuations continue to surge. Their base case is that the stock will hit their price target of €1,400, the second-highest estimate among Wall Street brokers, according to data compiled by Bloomberg.

ASML shares advanced 1.2% to €1,163 on Friday. Its market value surpassed $500 billion this week, becoming only the third European company to reach that milestone.

Blockbuster profits, driven by intense demand for ASML’s specialized chipmaking equipment, unpins Morgan Stanley’s argument for the stock. They see profits of about €46 per share in 2027, almost doubling from 2025 levels.

TSMC’s stronger-than-anticipated outlook has kicked off a fresh wave of optimism about AI spending this week. Separately, the US and Taiwan have also agreed to a long-sought trade pact that would see Taiwanese semiconductor companies increase financing for American operations by $500 billion.

Beyond TSMC, higher memory-chip pricing will lead to more capacity buildouts at memory chipmakers and drive demand for ASML’s tools, Morgan Stanley said. ASML’s sales to Chinese chipmakers have also been better than expected, the analysts said.

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